AI stocks have had a rough month. After strong growth in 2024 driven by AI excitement, investors are now cautious about high valuations, possible tariffs, and trade limits with China. This shift has caused some turbulence in the market.
Two big winners from 2024 were Broadcom (NASDAQ: AVGO) and Marvell (NASDAQ: MRVL), which have similar product portfolios. Marvell is even nicknamed “baby Broadcom.”
However, last week’s earnings reports saw Broadcom’s stock rise while Marvell’s fell, highlighting some shifting dynamics in the AI market.
Marvell Struggles to Reassure Investors
Both Marvell and Broadcom focus on infrastructure chips for networking and communications, along with custom ASIC IPs used in AI accelerators (XPUs) by major cloud providers.
Marvell has seen impressive growth in custom ASICs. Two years ago, it expected about $200 million in ASIC revenue for 2023 and $400 million in 2024. Instead, it made over $1.5 billion in 2024 and expects more than $2.5 billion in 2025.
However, Marvell’s ASIC business relies heavily on Amazon (NASDAQ: AMZN). It also works with Alphabet on Arm-based CPUs, but not on Alphabet’s AI accelerator.
During Marvell’s earnings call, CEO Matt Murphy acknowledged solid ASIC revenue visibility for the next two years but couldn’t deny rumors that Amazon might switch to a different supplier for its next-generation XPU.
Murphy’s lack of a clear “no” on these rumors likely worried investors, raising concerns about Marvell’s long-term growth in ASICs.
Broadcom Gains More Potential Customers
Meanwhile, Broadcom reported strong AI growth and announced two new potential ASIC customers.
Broadcom already works with Alphabet (for TPUs), Meta Platforms, and ByteDance (owner of TikTok).
In December, Broadcom revealed it had engaged with two new potential customers. Last week, it confirmed two additional prospects, suggesting more potential business, possibly even from Amazon — though that remains speculative.
Some industry insiders believe the original two new customers were Apple and OpenAI, while the latest two could be Oracle and Elon Musk’s xAI.
These customers haven’t been confirmed, but the possibility of adding more clients boosted Broadcom’s stock. In contrast, uncertainty about Marvell’s reliance on Amazon hurt its share price.
Valuation Differences Also Matter
Valuation likely played a role in the contrasting stock movements. Broadcom has more custom ASIC customers and a diversified business, including high-margin software, yet traded at a lower valuation than Marvell before last week.
On a non-GAAP basis, Marvell made about $1.3 billion ($1.57 per share) in its fiscal year ending January, giving it a P/E ratio of 46.8.
Before its earnings, Marvell traded at 57.3 times earnings — and hit 81.2 times at its January peak.
Broadcom, by comparison, trades at about 36.3 times trailing-12-month adjusted EPS, up from 33.5 before its report.
Despite being nearly nine times larger than Marvell, Broadcom’s 25% growth last quarter was almost as fast as Marvell’s 27% growth, showing that size hasn’t slowed Broadcom’s momentum.
In short, Broadcom’s diversified customer base and lower valuation helped it thrive, while Marvell’s reliance on Amazon and lack of clarity about future business created uncertainty for investors.
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