Wall Street analysts think this semiconductor stock is better than Nvidia and could rise 71%

Semiconductor stocks are performing well in the market, as evidenced by the impressive 56% gains recorded by semiconductor companies. PHLX Semiconductor Division Exponential charting experts from the past year Nvidia (Nasdaq: NVDA) The company’s rock-solid position in the artificial intelligence (AI) chip market has played a starring role in the surge, with its shares soaring 233% during the period.

Nvidia’s graphics processing units (GPUs) are in huge demand for their training capabilities large language model (LL.M.), which forms the backbone of popular applications such as ChatGPT. Each AI GPU sold by Nvidia ranges in price from $10,000 to $30,000.Notably, the company reportedly made nearly 1,000% in profits on these GPU wafers, according to the investment banking firm raymond james.

The AI ​​chip market will grow rapidly in the future, with Nvidia taking the lead Leverage its growing positionbut Citibank Analyst Atif Malik believes Mayville Technology (NASDAQ: MRVL) Probably a better semiconductor choice than Nvidia. Let’s see why.

Marvell Technology is becoming another solid AI semiconductor company

The Citi analyst maintained a buy rating on Marvell stock, noting that the company is well-positioned to capitalize on growing demand for custom AI chips and its optical modules that enable high-speed transmission between data centers. communication. Only one is optimistic about Marvell’s prospects.

Rick Shafer Oppenheimer Marvell’s sales are expected to accelerate this year due to exposure to AI, citing stronger demand for the company’s data center storage and switching solutions. Schafer believes Marvell will benefit from multiple new product cycles and potential content revenue, which explains why analysts have an outperform rating on the stock.

A closer look at the semiconductor solutions Marvell offers shows why Wall Street is optimistic about the company’s AI-related prospects. Marvell is known for making custom application-specific integrated circuits (ASICs) that the company says are “tailored for specific uses.” The unique needs of each artificial intelligence, cloud data center and OEM customer. “

It is worth noting that major cloud service providers such as Microsoft, letterand meta platform has been focused on developing custom ASICs for negotiating AI workloads. The reason why these major AI players are developing custom AI chips is that they can help them achieve higher performance and power efficiency. This is not surprising, as ASICs are programmed to run specific workloads and perform specialized operations, which can help accelerate AI training and inference models.

Morgan Stanley According to predictions, ASICs may account for 30% of the entire AI chip market by 2027, and investment banks believe the market may be worth US$182 billion by then. Therefore, according to the following data, the AI-focused ASIC market could be worth nearly $55 billion per year by 2027. Morgan Stanley estimates. This could present an opportunity for healthy growth for Marvell, considering it generated $5.5 billion in revenue over the past year.

How much upside can investors expect?

Marvell Technology reportedly controls 12% of the ASIC market JPMorganAssuming Marvell can retain this share in 2027 and the AI-focused ASIC market does reach $55 billion, the company expects AI-related revenue to increase by $6.6 billion. That would be a significant jump from Marvell’s current quarterly revenue of $200 million in AI-driven chip sales, and the $1 billion in potential revenue the company could generate from the market in fiscal 2025, which begins at the end of this month.

Analysts predict Marvell’s revenue growth will accelerate after falling 7% to $5.5 billion in fiscal 2024, jumping to $6.1 billion in fiscal 2025 and $7.3 billion in 2026. Given the additional revenue associated with artificial intelligence, its growth is likely to be even faster. As just mentioned, Marvell can produce.

Assuming Marvell does achieve $6.6 billion in incremental revenue in 2027 (which would be consistent with most of fiscal 2028), its revenue could increase to $12 billion four years later, which is what was expected in fiscal 2024 More than double the $5.5 billion. Marvell’s five-year average price-to-sales ratio is 8.6 percentage points, and revenue is expected to reach $103 billion, which would represent a 71% increase from current levels.

Marvell currently trades at 11 times sales, which isn’t too expensive based on historical levels, especially given the new growth drivers it could benefit from. So investors looking to buy an AI stock that’s not as expensive as Nvidia – which trades at a price-to-earnings ratio of 33 times sales – might consider buying Marvell Technology, since it can really grow from custom AI chips over the long term. huge gains in sales.

Should you invest $1,000 in Marvell Technology right now?

Before buying Marvell Technology stock, consider the following factors:

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JPMorgan Chase is the advertising partner of The Ascent, owned by the Motley Fool; Citigroup is the advertising partner of The Ascent, owned by the Motley Fool; Randi Zuckerberg, former director of market development and spokesperson of Facebook, Mark Zuckerberg, CEO of Meta Platforms ’s sister, is a board member of The Motley Fool. Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. harsh johan Does not hold any of the above stocks. The Motley Fool holds and recommends Alphabet, JPMorgan Chase, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends Marvell Technology. Motley Fool has disclosure policy.

Wall Street analysts think this semiconductor stock is better than Nvidia and could rise 71% Originally published by The Motley Fool

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