Marvell Technology stock soars 30% after Jensen Huang touts it as next trillion company

Marvell Technology is the new entrant in the AI boom-led bandwagon as its shares rose over 30% on Tuesday. The AI boom remains one key anchor to the current global market rally, and any new entrant in this space is getting valued at euphoric valuations. However, the reason behind the rally in Marvell Technology’s is unique. Here is why everyone is buzzing about the company on Wall Street.

Blessings of NVIDIA

NVIDIA, which holds the title of poster boy of this current AI boom rally, has led blessed Marvell Technology with its golden hand. Jensen Huang, CEO of NVIDIA, at a keynote address at Computex, said that Marvell Technology could become the next trillion-dollar company. Soon after this praise by Jensen Huang, shares of Marvell Technology jumped 32% to hit fresh record highs. The magnitude of the rally is not surprising now, as any company that is participating in the AI infrastructure race to build augment AI ecosystem is skyrocketing vertically. The similar pattern we have seen with Korean chip giants like Samsung, SK Hynix and Indian optical fibre maker Sterlite Technologies, where shares have rallied multifold within a few months.

What does Marvell Technologies do?

Marvel Technologies is a critical player in the AI data centre ecosystem, which makes products that connect chips in the data centre. As the AI computing demand increases at an unprecedented speed, it demands higher capacity of data centres with bigger workloads to function. To function these capacities, the data centre needs new and efficient products that would sustain the huge compute workload and minimise the latency as much as possible. Marvel Technologies bridges this gap with its optical interconnects, which link chips with light instead of electricity and transfer the data at lightning speed. The company also builds ASICs (custom silicon) that help tech titans like Amazon, Google and Microsoft application-specific chips tailored for their own AI infrastructure, saving them operating costs.

Is the hype all worth it?

In the company’s latest earnings call, the company provided upbeat guidance on the revenue led by a sharp surge in demand for its optical interconnects. The company’s Q1 revenue jumped 28% YoY to $2.42 billion and has guided for $16.5 billion in revenue next year. During the current quarter, the data centre business contributed 76% to the entire topline, which speaks volumes about the opportunity the company holds.

What lies ahead?

Marvel Technology’s current market capitalisation stands at $254 billion, and as Jensen Huang said, it could become a $1 trillion company, providing a big runway for the company. The current euphoria could also make it seem possible. However, inflated valuations of tech companies no material profitability metrics on AI spending remain key risks to the rally.