Analysts at Bank of America (BoA) have reiterated their ‘Buy’ rating for chipmaker Marvell Technology Group Ltd. (NASDAQ:MRVL) on their belief its artificial intelligence (AI) opportunities are accelerating and can help offset macroeconomic impacts elsewhere.
In a note to clients following the Nvidia rival’s second-quarter results, the analysts highlighted that Marvell has a favourable combination of assets in terms of data centers and infrastructure, several of which have AI exposure, including electro-optics, ethernet switching, custom application-integrated circuit (ASIC) chips, and data processing units.
They anticipate these assets will contribute to strong growth for Marvell, forecasting a compound annual growth rate of 13% to 15% in sales and 30% to 35% in pre-tax earnings per share from 2023 to 2025.
“We believe MRVL’s core electro-optics (Inphi) franchise is doing very well, nearly perfectly correlated with ramp in Nvidia AI accelerators,” they wrote.
They also wrote that they were optimistic about custom silicon total addressable market growth but noted key competitor Broadcom, which has achieved more than $3 billion in custom silicon sales and is developing tensor processing units (TPUs) in partnership with Google.
However, the BoA analysts pointed out that Marvell’s stock could come under pressure from overly optimistic sales growth estimates from Wall Street analysts, uncertainty over the timing and scale of the rollout of some custom ASIC chips, and macroeconomic challenges in enterprise and 5G networking markets.
The analysts lowered their price target on the stock from $80 to $75 based on the recent contraction in sector multiples.
Marvell shares were down 8.5% at US$52.44 mid-morning on Friday.
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie