The Hidden AI Infrastructure Play Trading 35% Below Its Highs
Why Marvell Technology Could Be 2026’s Best Semiconductor Opportunity
While NVIDIA dominates AI headlines, a lesser-known chip company has quietly become the essential “plumbing” behind the entire AI revolution—and it’s trading at a significant discount.
Marvell Technology (NASDAQ: MRVL) isn’t building the flashy GPUs that power ChatGPT. Instead, they’re building something arguably more important: the ultra-high-speed connections that allow those GPUs to talk to each other.
And right now, the stock is offering a rare entry point.
The Numbers Tell the Story
Marvell just posted record results for Q3 FY2026:
- Revenue: $2.08 billion, up 37% year-over-year
- Data Center Revenue: $1.52 billion, up 38% YoY
- Non-GAAP EPS: $0.76, up 77% from last year
- Operating Margin: 36.3%, the highest in company history
But here’s what makes this interesting: despite these blowout numbers, the stock has pulled back from its January 2025 high of $127 to the low $80s today.
That’s a 35% haircut on a company growing earnings at nearly 80% annually.
From Storage Company to AI Powerhouse
Under CEO Matt Murphy’s leadership, Marvell has undergone one of the most successful pivots in semiconductor history.
Just two years ago, data center represented about one-third of Marvell’s revenue. Today, it’s over 73%—and growing.
The transformation centers on two critical capabilities:
1. Custom Silicon for Hyperscalers
Amazon, Google, and Microsoft are racing to reduce their dependence on off-the-shelf chips. They want custom-designed processors optimized for their specific AI workloads.
Marvell has emerged as the go-to partner for this transition. The company just secured a 5-year, multi-generational agreement with Amazon Web Services (AWS), covering everything from custom AI chips to optical networking components.
This isn’t a small deal. Analysts estimate Marvell could generate $1-2 billion annually from AWS alone by 2026-2027.
2. Optical Interconnect Dominance
Here’s the AI bottleneck no one talks about: as AI models get larger, the speed at which chips can communicate becomes the limiting factor.
Think of it like a highway system. NVIDIA builds the cars (GPUs). Marvell builds the highways, bridges, and interchanges that let those cars move data at light speed.
Marvell’s electro-optics products—including PAM DSPs, coherent digital signal processors, and data center interconnect solutions—are seeing explosive demand. Revenue from optical interconnect products grew at double-digit rates sequentially last quarter.
The Celestial AI Acquisition: A $3.25 Billion Bet on the Future
On December 2nd, Marvell announced it would acquire Celestial AI for up to $5.5 billion—a bold move that signals where the industry is heading.
Celestial AI has developed “Photonic Fabric” technology that uses light (instead of copper wires) to connect AI chips. This matters because:
- 2x more power efficient than copper interconnects
- 16 terabits per second of bandwidth in a single chiplet (10x current standards)
- Operates reliably in extreme thermal environments near multi-kilowatt processors
AWS Vice President Dave Brown endorsed the deal, stating it would “help further accelerate optical scale-up innovation for next-generation AI deployments.”
Marvell expects Celestial to contribute $500 million in annualized revenue by late 2028, scaling to $1 billion by fiscal 2029.
Why the Stock Is Down—And Why That’s Your Opportunity
MRVL has been hammered by two concerns:
1. Geopolitical Risk: Marvell has historically derived significant revenue from China. While the company has diversified toward U.S. hyperscalers, tariff fears have created a “geopolitical discount” on the stock.
2. AI Digestion Phase: After a massive run-up in AI infrastructure spending, some investors worry about a near-term pause. This has weighed on the entire semiconductor sector.
But here’s what the bears are missing:
- Marvell just raised full-year guidance. Management expects 40%+ revenue growth for fiscal 2026.
- Data center revenue is projected to grow 25%+ in fiscal 2027—and that’s before Celestial AI contributes.
- The AWS deal provides multi-year visibility. This isn’t speculative; there are signed contracts and purchase orders covering entire fiscal years.
What the Analysts Are Saying
Wall Street remains overwhelmingly bullish:
- Average 12-month price target: ~$115-120
- Highest target: $156 (Evercore ISI)
- Consensus rating: Moderate Buy (44 Buy, 14 Hold, 0 Sell ratings in January 2026)
At current prices around $80, that implies 40-50% upside to analyst consensus targets.
J.P. Morgan rates the stock a Buy, citing “surging AI custom silicon growth, strengthening data center networking position, and multi-year visibility through 2027.”
RBC Capital just initiated coverage with an Outperform rating, highlighting Marvell’s unique positioning in AI connectivity.
The Risk Factors to Watch
No investment is without risk. Key concerns include:
- China exposure: Roughly 40% of historical revenue, though this is declining
- Custom silicon execution: These designs have no margin for error—if a hyperscaler changes plans mid-cycle, Marvell could face revenue gaps
- Gross margin pressure: As custom silicon becomes a larger percentage of sales, margins may compress slightly
- Integration risk: The Celestial AI acquisition must execute flawlessly
The Bottom Line
Marvell Technology has transformed itself into an essential AI infrastructure company at exactly the right time.
The fundamentals are accelerating: 37% revenue growth, 77% earnings growth, record margins, and major customer wins with multi-year contracts.
Yet the stock trades 35% below its highs, weighed down by macro concerns that may prove temporary.
For investors looking for AI exposure beyond the obvious names, MRVL represents a compelling risk/reward at current levels.
The market is giving you a chance to buy the “plumbing” of the AI revolution at a discount. That’s a signal worth paying attention to.
Disclaimer: This is not investment advice. Always do your own research and consult with a financial advisor before making investment decisions. Past performance does not guarantee future results.