Marvell stock plunges 11% as AI chip demand goes from hot to cool

Marvell Technology’s shares plummeted 11.3% in premarket trading after the chipmaker delivered a disappointing data center outlook that fell short of investor expectations. The decline reflects growing concerns about the AI chip market’s cooling momentum, as even companies positioned to benefit from artificial intelligence infrastructure buildouts struggle to meet lofty growth projections.

What you should know: Marvell’s third-quarter data center revenue is expected to remain flat sequentially, despite investor bets on the company’s custom AI chips for cloud giants.

• CEO Matthew Murphy attributed the weakness to normal “lumpiness” when large cloud providers build infrastructure, but didn’t specify the source of demand softening.
• The company’s reliance on custom application-specific integrated circuits (ASICs)—specialized chips designed for specific tasks rather than general computing—exposes it to volatile customer inventory cycles.
• Marvell reported second-quarter revenue of $2.01 billion, matching expectations, but its third-quarter forecast of $2.06 billion came in below analysts’ $2.11 billion estimate.

The big picture: The AI chip sector is showing signs of deceleration after months of explosive growth expectations.

• Nvidia, the sector leader, saw its recent earnings beat forecasts but revealed slowing data center growth, causing shares to fall despite the strong results.
• Morgan Stanley analysts expressed surprise that Marvell’s ASIC business full-year revenue “continues to fall.”
• The company trades at a 12-month forward price-to-earnings ratio of 23.95, significantly below Broadcom’s 39.03, reflecting investor caution about its growth prospects.

Customer challenges: Key relationships with major cloud providers face headwinds that could impact Marvell’s pipeline.

• Microsoft reportedly delayed its in-house AI chip rollout to 2028 or later, potentially affecting Marvell’s component supply business.
• Amazon Web Services, another major customer, has been losing market share to faster-growing rivals Microsoft Azure and Google Cloud.
• Summit Insights analyst Kinngai Chan noted that Marvell lacks scale compared to larger peers and faces margin pressure from customers pursuing multivendor sourcing strategies.

Why this matters: Marvell’s struggles highlight the volatility facing second-tier AI chip companies that depend on custom solutions for cloud giants, as the initial AI infrastructure boom faces reality checks around demand sustainability and customer concentration risks.