Marvell Earnings: AI Helping to Offset Spending Corrections as We Maintain our $61 Valuation

We maintain our $61 fair value estimate for shares of narrow-moat Marvell Technology as we bake in lower short-term expectations but continue to expect strong long-term growth. In our view, Marvell’s enterprise, telecom, and consumer end markets are experiencing significant softness due to spending slowdowns after solid investment in the previous two years. On the other hand, Marvell’s artificial intelligence products are driving tremendous growth in data center sales. We continue to see the firm as well-positioned in both data center and enterprise networking. It has strong capabilities in merchant silicon, optical chips, and custom chip design that carve its moat. We believe AI will become Marvell's increasingly large growth driver over the next five years. Shares dropped 8% afterhours on weak guidance in nondata center markets, and we still see shares as overvalued. While we are bullish on Marvell’s AI opportunity, we believe it has been priced into shares too heavily.