The artificial intelligence (AI) chip market is undergoing significant changes as the share of custom processors is expected to increase, particularly benefiting companies like Marvell Technology (NASDAQ: MRVL). Analysts forecast a robust upside for Marvell amid growing demand for application-specific integrated circuits (ASICs), which are tailored for distinct tasks and offer enhanced performance and cost efficiency compared to traditional graphics processing units (GPUs). This shift comes as Nvidia, which has dominated the AI chip space with an 81% market share, faces intensifying competition.
Nvidia’s long-standing dominance has been bolstered by the technological advantages of its GPUs, which are set to be further enhanced by the anticipated launch of its Vera Rubin chips. These chips are expected to lower the costs associated with AI model training and inference, prompting major hyperscalers like Amazon and Microsoft to commit to their deployment later this year. However, Nvidia’s substantial market capitalization may pose challenges to its stock price, especially as smaller competitors, such as Marvell, are projected to gain traction.
Marvell Technology is positioning itself strategically within the custom AI processor segment, which is forecasted to see its share of AI servers rise from 20.9% in 2025 to 27.8% this year, according to TrendForce. In contrast, the GPU segment’s share is expected to decline from 75.9% last year to 69.7% by 2026. Marvell aims to quadruple its market share of custom AI processors from approximately 5% in 2023 to a significant position by 2028, with its addressable market projected to expand from $21 billion to $94 billion over the same timeframe.
The company reported an estimated revenue increase of almost 42% for its recently concluded fiscal year 2026, reaching $8.18 billion, alongside a remarkable 80% rise in earnings per share to $2.83. Analysts anticipate that Marvell could continue this momentum into the new fiscal year, driven by rising investments in AI data centers and the increased prevalence of custom processors.
Marvell’s diverse client base, which includes tech giants like Alphabet and Amazon, positions it well to capitalize on the growing demand for custom AI chips. The company is actively pursuing more than ten customers in this segment, with ambitions to secure over 50 chip designs across its potential customer landscape. This marks a significant increase from the 18 chip designs it already has in place with the four major U.S. hyperscalers, suggesting a promising outlook for revenue and earnings growth that may exceed current analyst expectations.
Analysts project Marvell stock may outperform Nvidia
Market analysts have set a median 12-month price target of $119 for Marvell Technology, indicating a potential upside of 50%. In comparison, Nvidia’s stock has a median price target of $250, suggesting a 30% upside over the same period. The possibility of Marvell outperforming Nvidia becomes more plausible given the company’s forecasted earnings jump of 23% for fiscal 2027, alongside its more favorable sales multiple of 10 times compared to Nvidia’s 24 times. The upcoming release of Marvell’s fourth-quarter fiscal 2026 results on March 5 could act as a catalyst for its stock, particularly if it delivers strong numbers and optimistic guidance.
While the Motley Fool Stock Advisor has identified its ten best stocks, notably excluding Marvell Technology, the growing momentum and market dynamics surrounding custom AI processors could make Marvell an attractive investment. Historical performance of stocks featured by the advisory service suggests that investors may see significant returns over the long term. For instance, an investment in Nvidia when it made the list in 2005 would have returned over $1 million today.
In summary, as the AI chip landscape evolves, Marvell Technology appears to be on a trajectory that could enable it to outperform established players like Nvidia, driven by a strategic focus on custom AI processors and a robust client base. The implications of this shift in the market could redefine investment strategies in the tech sector as companies adapt to changes in demand and technological advancements.
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