In This Article:
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Marvell Technology nosedived earlier this year after providing disappointing guidance.
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Tariffs and economic uncertainty continue to weigh on the California-based chipmaker.
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Its valuation has come way down, which could make it more appealing now to investors.
Many artificial intelligence (AI) stocks are trading at sky-high valuations and can look too expensive to buy today. But there's one AI stock that has recently been struggling, and it could be an attractive buy on weakness.
Shares of Marvell Technology (NASDAQ: MRVL) are down a whopping 32% since the start of the year after the company's recent performance and guidance underwhelmed investors and analysts. It's off by more than 40% from its 52-week high of $127.48.
The tech company develops application-specific integrated circuits (ASICs) which its customers can use as custom chips in their data centers. They can be cost-effective alternatives to Nvidia's GPUs, which are designed to serve broader, more generic needs and workloads.
But despite a huge opportunity in AI, Marvell's stock hasn't been doing well of late. Could it be a bargain buy in a red-hot AI market, or are there problems that should keep you away from buying this stock right now?
It hasn't been a bad year for AI stocks as a whole. The Roundhill Generative AI & Technology ETF has risen by 13% so far in 2025. Even the S&P 500 is up close to 2% after plunging well into negative territory following the U.S. announcement of global tariffs in April.
The big issue is that when Marvell released its results earlier in the year, investors weren't thrilled with the chipmaker's guidance, and it perhaps wasn't as rosy as it should have been. Some analysts were hoping for $2 billion in revenue for the first quarter (which ended on May 3). Instead, the company's forecast was for around $1.88 billion, so a sell-off ensued.
The good news is that Q1 sales came in a little better than expected at nearly $1.9 billion. For the current quarter, management is now expecting net sales of around $2 billion. While the stock is up since the release of its most recent results, it hasn't been able to recover from the sell-off that took place earlier in the year.
Shares of Marvell were already beginning to decline before its guidance miss earlier in the year, likely due to its inflated valuation. The stock had been an expensive buy, trading at a forward price-to-earnings (P/E) multiple of more than 40 (based on analyst expectations). At such a high premium, analysts are expecting the company to not only post strong numbers, but also to provide a strong guidance.