Marvell selloff deepens as investors seek clarity on Google AI deal payoff

Chip designer Marvell Technology's shares fell more than 8% to $221.6 in early trading on Friday as investors looked beyond the company's ‌solid results in search of fresh clues for long-term growth.

Marvell has become a market darling fueled by the AI spending boom as Big Tech races to adopt custom chips for greater cost efficiency and performance, powering its shares to nearly triple this ‌year. However, with Big Tech's AI spending set to top $740 billion this year, investors had come to expect increasingly ‌stronger results from companies tied to the boom.

Marvell's higher revenue forecasts for fiscal years 2027 and 2028 were also overshadowed by questions over how quickly its newly announced Google custom-chip deal, which could generate up to $120 billion in revenue through fiscal 2033, would begin contributing meaningfully to revenue. "Expectations were ⁠higher, mostly ​because of the Google deal," ⁠analysts at Morgan Stanley said, adding that its contribution was already largely reflected in the company's prior guidance.

CEO Matt Murphy said Marvell's custom revenue ⁠targets through fiscal year 2028 already reflected some Google-related revenue and that it would contribute much more significantly in fiscal year 2029. Friday's rout puts ​the company on course to erase more than $17.4 billion in market value, if the losses hold.

"While ⁠the quarter and near-term guides weren't overly exciting vs expectations, a combination of the GOOGL deal, prospects with Microsoft and AI connectivity upside could point to ⁠some ​big figures that make $20 in EPS power before the end of the decade look realistic," Melius Research analysts said in a note. At least eight brokerages raised their price targets on Marvell following the results, with the median target ⁠of $275 implying a 13.8% upside from Thursday's close, according to data compiled by LSEG.

Thanks to more data-center revenue, the company ⁠expects revenue to grow about 45% ⁠in fiscal year 2027 and reach about $18 billion in fiscal year 2028. Marvell trades at a premium compared to rival Broadcom , with a 12-month forward price-to-earnings ratio of 58.41 ‌versus 32.15, according ‌to data compiled by LSEG.