The rise in demand for artificial intelligence (AI) chips has resulted in significant growth within the semiconductor sector. However, this growth has not been uniform across all companies. Specifically, Broadcom and Marvell Technology have experienced differing levels of success in this domain. Although both companies are seeing an uptick in custom AI chip sales, the question arises: which of the two is the superior investment choice?
Broadcom, a prominent figure in the application-specific integrated circuits (ASIC) market, currently holds a dominant position in the AI chip industry with an estimated 35% market share. The company anticipates generating $10 billion in revenue from AI chip sales this year, with a projected increase to $20 billion by 2026. Analysts have also raised their revenue expectations for Broadcom, with some predicting that the company’s AI revenue could potentially reach an ambitious $50 billion if they secure another major customer.
On the other hand, Marvell Technology, while a smaller player in the custom AI chip market, expects its annual revenue to reach $1.5 billion in the current fiscal year. The company’s CEO, Matt Murphy, has stated that they anticipate a substantial rise in AI-related revenue by the following fiscal year, possibly reaching $2.5 billion. Despite facing challenges in other segments, Marvell has observed a significant 87% increase in data-center revenue year over year, driven by the demand for its AI chips.
Although Broadcom currently leads the AI chip market, Marvell’s smaller size provides an opportunity for accelerated growth. The company is projected to deliver impressive growth in the next fiscal year, with estimates indicating a 32% increase in revenue and a further 20% jump in the subsequent year. Conversely, Broadcom’s revenue is expected to rise by 14% next year and 10% the year after.
In summary, due to Marvell’s smaller size, AI could have a more substantial impact on the company, potentially leading to faster growth. Additionally, Marvell’s stock is currently trading at 11 times sales, which is lower than Broadcom’s sales multiple of 15. Therefore, for investors seeking to invest in AI stock, Marvell Technology seems to be the superior option amongst the two companies discussed in this article. With the potential for significant AI-related revenue growth and a more attractive valuation, Marvell presents an appealing investment opportunity within the rapidly expanding AI chip market.