IBD stock analysis
- Stocks soared higher in May on earnings, then fell back
- Shares on track to form a consolidation by next week
- Possible entry point now available at 61.46 from the pullback
Industry group ranking
* Data not in real time. All data shown was acquired as of 1:52 PM EDT on 03/07/2023.
Semiconductor manufacturer Marvel technology (MRVL) is the IBD Stock of the Day. MRVL stock found technical support at a key level as analysts debate AI-related investment in data centers upside relative to other business trends.
Marvell manufactures chips used in wireless telephone networks, automobiles, industrial systems, data storage devices, and data centers. Semiconductor companies are in favor as AI stocks to watch due to the high-performance computing and networking needed in data centers.
For its fiscal 2023 that ended in January, Marvell’s sales increased 33% to $5.92 billion. In fiscal 2024, sales are expected to decline 6%, before recovering 17% in fiscal 2025.
But Marvell’s management expects its AI chip business to grow to $400 million in fiscal 2024, up from $200 million in fiscal 2023. Then it will see AI sales double again in fiscal 2025 to $800 million, making up about 15% of sales.
On the other hand, management expects weakness in sales of telecommunications networks, enterprise networks and data storage.
MRVL shares rise on AI Outlook
MRVL shares rose on the AI outlook as investors shrugged off fiscal 2024 first-quarter earnings that fell 40% while revenue fell 9%. Marvell reported its fiscal first quarter results after the market closed on May 25. Marvell shares rose 32% on May 26.
On May 30, the next trading session, shares rose another 4% to 67.99 in intraday trading. But the stock reversed and finished the day down 3%, initiating a pullback pattern.
On the technical side, the MRVL stock in June began to form a foundation. Marvell stock still has one more week to complete a consolidation.
During the pullback, MRVL stock found support at its 21-day EMA on July 1. In today’s stock market, MRVL stock rose 2.6% to 61.35, continuing the rebound from the 21-day line.
Acquisitions Inphi, Innovium
For aggressive investors, Marvell stock would have an entry point of 61.46, the high since June 28, as it breaks a downtrend.
Investors may find a deeper dive into the AI business worthwhile.
During its first-quarter earnings call, management blew up AI revenue. Most of Marvell’s AI revenue comes from optical digital signal processors operating at 800 gigabits per second.
To enter the optical networking business, Marvell acquired Inphi in 2020 and Innovium in 2021. Amazon Web Services, the cloud unit of Amazon.com (AMZN), is a large Innovium customer.
AI stocks to watch
Additionally, Marvell’s digital signal processors work in tandem with Nvidia (NVDA) core processors inside data centers. Optical SDRs will remain the primary driver of AI growth for MRVL stock in fiscal 2024.
With a longer range, Marvell could get more business in the computing side of AI computing. Nvidia is by far the leading supplier of chips that process AI software. Advanced Micro Devices (AMD) aims to challenge Nvidia’s dominance with new devices. AND, intel (INTC) is a player among AI stocks in the market.
Marvell, together with broadcom (AVGO), sells custom AI processing chips. This is a small part of the market but growing. Analysts predict that the demand for custom AI processing chips will increase due to the rise of “generative” AI.
Training AI models requires an order of magnitude more computing power than running real-time AI applications inference, analysts say.
This is the opportunity Marvell intends to pursue, even if the actual revenues are small. Also, Alphabet (GOOGL)-parent Google and Amazon have developed their own in-house developed AI silicon.
While Marvell has a strong presence in optical networks, Broadcom is a tough rival. And, tougher competition looms by Cisco systems (CSCO), analysts say. Cisco is selling optical devices aimed at the artificial intelligence market.
Title Marvell: technical evaluations
The IBD Stock Checkup tool shows that MRVL stock has a composite score of 87 out of a possible 99. The rating indicates that Marvell stock currently outperforms 87% of all stocks in the fundamental and technical stock selection criteria.
MRVL stock has a relative strength score of 93. The rating shows how a stock’s price performance over the past 52 weeks holds up against all other stocks in the IBD database.
Additionally, Marvell has an Accumulation/Distribution score of C+. This valuation analyzes the price and volume changes of a stock over the last 13 trading weeks. A grade of A signals heavy institutional buying.
Follow Reinhardt Krause on Twitter@reinhardtk_techfor updates on 5G wireless, artificial intelligence, cybersecurity, and cloud computing.
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