Marvell Technology: The Undervalued AI Semiconductor Leader with 3nm Muscle and Smart Partnerships

Marvell Technology (NASDAQ: MRVL) is quietly emerging as a powerhouse in the AI semiconductor race, yet its stock remains undervalued compared to flashy peers like NVIDIA or AMD. With a $2 billion annual R&D engine, strategic partnerships with Amazon and Microsoft, and a focus on cutting-edge 3nm chip technology, Marvell is positioned to capitalize on the AI boom without the sky-high valuations of its competitors. Here's why investors should take notice now.

The 3nm Edge: Amazon's AI Infrastructure Play

Marvell's partnership with Amazon Web Services (AWS) is a goldmine. The two companies inked a five-year, multi-generational agreement in December 2024 to develop 3nm-based AI chips for AWS's data centers. The Trainium3 chip, built with TSMC's 3nm process, delivers twice the performance of its predecessor while slashing energy use by 40%. These chips power AWS's Trn2 UltraServers, which are designed to rival NVIDIA's A100/H100 GPUs at a fraction of the cost.

Why this matters:
- 76% YoY revenue growth in Marvell's data center segment ($1.44B in Q1 2025), driven by AWS's AI chip demand.
- Multiyear contracts ensure visibility through 2026–2027, insulating Marvell from cyclical tech downturns.
- The partnership leverages AWS's cloud-based EDA tools, accelerating design cycles and reducing costs—a smart play in an industry where R&D is a battleground.

R&D Spending: $2B Burned on the Future, with Results

Marvell's $1.896 billion in FY2025 R&D spending (up 6% from FY2024) isn't just a cost—it's an investment in dominance. This capital is fueling innovations like:
- AI-first silicon architectures optimized for large language model (LLM) training.
- Microsoft's Maia project, an AI chip collaboration expected to generate revenue starting in 2026.
- 3nm PCIe products and optical interconnects that keep data centers humming at peak efficiency.

The payoff? AI revenue is projected to hit over 50% of total revenue within 12 months, with estimates of $3B by 2026. CEO Matt Murphy isn't just talking about AI—he's building it into Marvell's DNA.

The Valuation Case: P/S 10.55x vs. Peers at >20x

Marvell's stock trades at a Price/Sales (P/S) ratio of 10.55x, far below peers like NVIDIA (23x), AMD (18x), and Broadcom (21x). This discount ignores:
- Strong margins: Gross margins of 59-60% in Q2 2025, with a path to 62-64% by 2026 as AI scales.
- Catalysts on the horizon: The June 17 investor event will clarify margin trajectories and long-term contracts, while the sale of its non-core automotive division (a $200M+ annual revenue drag) and $1.5B buyback program are shareholder-friendly moves.

Risks? Yes, but Manageable

• Amazon dependency: AWS accounts for 76% of data center revenue. However, switching chip suppliers would require costly reengineering, and Marvell's multiyear contracts provide runway.
• Competition: Foundries like TSMC or in-house AWS chip teams could pose threats, but Marvell's EDA-cloud integration and 3nm design wins create high barriers to exit.

Conclusion: A Buy Now for Risk-Adjusted Returns

Marvell isn't just a semiconductor company—it's an AI infrastructure juggernaut with a $2B R&D war chest, strategic partnerships, and a P/S ratio half that of peers. The stock's undervaluation is a rare opportunity in a market frothing over flashy AI stocks. With catalysts like the June investor event and the automotive division sale imminent, now is the time to buy MRVL before the market catches on.

Historically, a strategy of buying MRVL the day before earnings and holding for 30 days has delivered strong risk-adjusted returns, with a 12.68% CAGR and maximum drawdown of 8.98% since 2020. This underscores the timing advantage of entering positions ahead of upcoming catalysts like the June investor event.

Investment Thesis:
- Buy: Target $50–$60 by end-2025 (vs. $30 current price).
- Hold: Until the June event clarifies margin trends.
- Avoid: Only if AWS abruptly shifts to in-house chipmaking—a scenario we consider unlikely given Marvell's deep integration.

In a sector where valuation sanity is scarce, Marvell offers a rare blend of growth and value. This is one chip stock that's primed to outperform.