Quick Read
Marvell (MRVL) has crashed 40% from peak, which is double the semiconductor sector’s 20% drop, making it a compelling dip-buy candidate.
Tech firms are aggressively pursuing custom silicon to escape Nvidia’s premium GPU margins, a tailwind that shows no sign of slowing.
UBS set a $340 target on Marvell, implying 64% upside, driven by the CXL business’s path to a $10 billion TAM.
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For value investors who don’t believe the AI bubble is bursting, starting with the semiconductor industry, some of the harder-hit names within the space might be worth a closer look. Undoubtedly, there’s more to dip-buying than simply going for the biggest (or close to it) dips in any given sell-off.
Either way, I do view shares of Marvell (NASDAQ:MRVL) as enticing, especially since they’ve already shed just over 40% from peak to trough while the broader semiconductor industry fell a hair north of 20%, with the iShares Semiconductor ETF (NASDAQ:SOXX) just making it into a bear market.
Not to discount how painful bear markets can be, but whenever you have an industry-wide lift-off and doubling in under a year’s time, perhaps a brutal bear market is the kind of “correction” that you’d want to see. Whether it takes an AI bubble off the table entirely remains the big question, but either way, the relief rally enjoyed in recent sessions could go either way.
As a slate of big Magnificent Seven quarterly earnings results comes up, they could set the tone for the rest of the semi space, especially as hints of future spending get dropped. In my view, one thing that keeps getting CapEx from the big AI hyperscalers (and beyond) is custom silicon.
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The custom silicon tailwind is still going strong
Firms are taking command when it comes to their silicon futures, and I just don’t see that changing, especially when you consider the kinds of gross margins that the GPU makers, most notably Nvidia (NASDAQ:NVDA), have been generating in recent years.
That’s where the opportunity seems to lie in these early days of the AI race. And if Nvidia’s CEO Jensen Huang is right in that semiconductors could become the largest industry in the world, I do think that custom silicon ought to remain a top priority of tech firms that hope to win the AI race.
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