By Arsheeya Bajwa
(Reuters) – Marvell Technology tumbled 16% and dragged down rival chipmakers on Thursday, after an in-line revenue forecast gave investors another reason to be jittery about spending on AI infrastructure, as a years-long rally shows signs of cooling.
Wall Street had looked to earnings from Marvell, a key supplier of custom AI chips to Big Tech, for signs of enduring demand that has powered U.S. market gains since ChatGPT ignited the generative AI boom in late 2022.
But the company’s current-quarter revenue forecast, $10 million above estimates, did little to allay fears about the need for big investments on AI infrastructure sparked by low-cost breakthroughs from Chinese startup DeepSeek.
Investors are now awaiting Broadcom’s results, due later on Thursday, as the most important supplier in the custom AI chip space, with Marvell ranked second.
Shares of Broadcom fell 4%, while Nvidia slid 2%.
The chip sector has also taken a hit from the tariffs imposed by President Donald Trump on countries including China. The broader Philadelphia Semiconductor Index is down 5% so far in 2025, after a gain of nearly 20% last year.
“Sentiment is rough for AI semiconductor stocks right now,” Melius Research analysts said. “The negative reaction (for Marvell) stems from what was only a slight revenue beat and raise.”
Marvell, which briefly overtook Intel in market value last year, was set to lose $12 billion, if premarket share losses hold. The stock rose more than 83% in 2024, but has declined about 18% so far this year.
Marvell exceeded its fiscal 2025 target of $1.5 billion in AI revenue, and expects to outdo its projections of $2.5 billion in AI sales in fiscal 2026, CEO Matt Murphy said on a post-earnings call.
J.P. Morgan analysts attributed the tepid outlook to “a slowdown in on-premise datacenter products,” referring to weaker demand for ethernet cables and fiber channels that transfer data across servers.
As Big Tech shifts spending to AI chips, demand for networking equipment — Marvell’s core business — has weakened.
Custom chips also yield lower margins than off-the-shelf processors. Marvell expects adjusted April-quarter gross margin of about 60%, down more than two percentage points from a year earlier.
At least nine brokerages cut their price targets for Marvell after the results, with median at $130 as per LSEG, representing a 44% upside to the stock’s last closing price.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sriraj Kalluvila)
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