Marvell Technology Falls 6% as Demand Slump Offsets AI Networking Equipment Orders
Chip firm Marvell Technology witnessed a 6% drop in its stock value on Friday as its soft forecast reflected the negative effect of a decline in demand from the wireless and enterprise markets, overshadowing a surge in orders for its AI networking equipment.
Market Disappointment and Rivals
Marvell’s larger competitor, Broadcom, also experienced a 2% decrease as it maintained its annual forecast, despite making a prediction pointing to AI-related chips generating $10 billion in sales by 2024.
Expectations Unmet
The market had high expectations for both Marvell and Broadcom, considering their sale of networking chips used to handle the extensive data demands of AI computing. This made them potential beneficiaries of substantial investments by major tech companies like Alphabet.
“Marvell and Broadcom earnings show that, although the semiconductor landscape is improving, the current quarter’s forecasts fall short of market expectations,” said Bob O’Donnell of TECHnalysis Research.
Market Impact
In response to the soft forecast, Marvell’s market value is expected to decrease by over $4 billion based on its latest trading price of $80.04, while Broadcom’s value is expected to decline by approximately $14 billion.
Both Marvell and Broadcom have faced challenges due to weak demand from cloud service providers and telecom operators, who have been emptying their inventories built up during the pandemic to avoid supply constraints.
Analysts’ Comments
Analysts at J.P.Morgan noted that Marvell was impacted by an “aggressive under-shipment of demand to flush out excess inventory.”
Forecasts Fall Short
Marvell’s first-quarter adjusted earnings per share are estimated to be 23 cents, plus or minus 5 cents, lower than the market estimate of 40 cents per share, according to LSEG data. Net revenue is expected to reach $1.15 billion, plus or minus 5%, which is also below the estimates.
Comparing Investment Opportunities
Marvell’s stock is currently trading at 40.21 times the expected earnings, in contrast to a forward price-to-earnings (PE) ratio of 27.58 for Broadcom and 36.49 for AI chip front-runner Nvidia. Lower PE multiples denote a more attractive investment opportunity.
Reported by Samrhitha Arunasalam in Bengaluru; Editing by Pooja Desai
