Marvell's AI Chip Surge: Riding the Data Center Revolution to a $94 Billion Future

The stock of Marvell Technology (NASDAQ: MRVL) has surged 14.6% in the second quarter of 2025, climbing to a June 18 high of $74.95. This momentum reflects Wall Street's growing conviction that the company is positioned to capitalize on the AI-driven data center boom. With its breakthrough 2nm custom Static Random Access Memory (SRAM) technology and a $94 billion total addressable market (TAM) by 2028, Marvell is betting big on its role in the next era of cloud infrastructure. But is the stock's recent rally sustainable, or are investors overlooking execution risks?

The TAM Expansion: A $94 Billion Opportunity

Marvell's revised TAM for data center infrastructure—upgraded to $94 billion by 2028 from a prior $70 billion estimate—signifies its strategic shift toward AI silicon. The 35% compound annual growth rate (CAGR) now projected for this segment underscores the surging demand for custom compute solutions in hyperscale data centers. These facilities, operated by Amazon, Microsoft, Google, and Meta, are racing to build AI models that require faster processing and lower power consumption. Marvell's SRAM innovation directly addresses these needs, offering a 30% improvement in energy efficiency compared to prior generations.

The company's roadmap includes collaborations with hyperscalers to co-design custom silicon, such as Amazon's Trainium2 chips. By providing memory and interconnect technologies, Marvell is embedding itself into the core of AI infrastructure. As CEO Matt Murphy noted, “This isn't just about selling parts—it's about enabling the next generation of AI.”

The 2nm SRAM Breakthrough: A Technical Masterstroke

The industry's first 2nm SRAM chip is Marvell's crown jewel. This advance reduces latency and power consumption in AI workloads, making it ideal for large language models and real-time analytics. Unlike competitors' solutions, Marvell's design integrates Package Integrated Voltage Regulators (PIVRs), optimizing power delivery to chips under peak loads.

Analysts at Bank of America recently raised their price target to $90, citing the SRAM's potential to secure 20% of the data center memory market by 2028. “Marvell isn't just keeping up—it's leading,” said BofA's Vivek Arya.

Partnerships and Pipeline: The Hyperscaler Play

Marvell's partnerships with hyperscalers are its secret weapon. For example:
- Amazon: Collaborating on Trainium2 ASICs for cloud-based AI training.
- NVIDIA: Integrating NVLink Fusion technology to accelerate data transfer between GPUs and servers.
- Google: Supplying electro-optical modules for its data centers.

These deals are already boosting revenue. In Q1 2025, data center sales surged 76% year-over-year to $1.4 billion, while carrier infrastructure (5G and optical transport) jumped 93%. Free cash flow hit $222.6 million, a 14% sequential increase, signaling strong operational discipline.

Risks: Execution, Competition, and Volatility

Despite the optimism, risks loom large. Competitors like Intel and AMD are ramping up custom AI chip offerings, while supply chain hiccups could delay production. Marvell's dependency on a few hyperscalers—a single client accounts for 25% of revenue—adds fragility.

The stock's volatility is also a concern. With 40+ 5% swings in the past year, including a 6% drop on June 5 after a profit-taking wave, investors must brace for turbulence.

The Investment Case: Buy the Dip, Hold for the Long Game

Marvell's stock trades at ~14x forward non-GAAP earnings, a discount to peers like NVIDIA (26x) and AMD (22x). Its $0.06 quarterly dividend and $150 million buyback in Q1 2025 further reward shareholders.

The June 17 investor event—expected to detail AI design wins and market share targets—could catalyze another leg higher. For investors, this is a stock to accumulate on dips. While near-term risks remain, the long-term story is undeniable: Marvell's SRAM and partnerships are cornerstones of the AI data center future.

Historical backtests of a strategy buying on earnings announcement dates and holding for 20 days showed a maximum drawdown of 64% and negative returns, highlighting the dangers of short-term trading. This reinforces the case for a long-term horizon—aligning with the company's TAM expansion and partnerships—to capture its growth trajectory.

Recommendation: Buy shares at current levels ($70.42 as of June 30), targeting $90 within 12–18 months. Avoid chasing momentum beyond $75 without catalysts.

In a sector where execution defines survival, Marvell's blend of innovation, partnerships, and financial discipline positions it to outperform. The $94 billion TAM isn't just a number—it's a roadmap to dominance.