Assessing AI Semiconductor Stocks: Broadcom vs. Marvell Technology

In 2024, semiconductor stocks Broadcom (NASDAQ: AVGO) and Marvell Technology (NASDAQ: MRVL) have experienced remarkable growth, with each company's stock price more than doubling. This surge is primarily driven by the increasing demand for application-specific integrated circuits (ASICs) and networking chips that support artificial intelligence (AI) workloads in data centers.

Broadcom's stock has risen by 124% this year, while Marvell's has climbed 93%. With such significant gains already achieved, the critical question for investors now is which of these AI-focused stocks to choose for their portfolios.

Understanding Broadcom's Strengths

The increasing demand for AI-specific ASICs is prompting cloud service providers to develop custom chips internally, making them less reliant on costly solutions from competitors like Nvidia. This situation positions Broadcom favorably, as the company is reportedly producing custom chips for major players, including Google, ByteDance, and Meta Platforms.

Broadcom's broad customer base has allowed it to capitalize on the expanding market for custom AI processors. In fiscal 2024 (ending November 3), Broadcom generated $12.2 billion from AI and networking processors, marking an impressive increase of 220% from $3.8 billion in fiscal 2023.

Looking ahead, Broadcom anticipates its addressable market for AI will grow to between $60 billion and $90 billion by fiscal 2027. Company executives noted during earnings calls that they are well-positioned to capture a significant share of this burgeoning market, which is expected to propel their AI revenue upwards.

Additionally, J.P. Morgan estimates Broadcom holds a dominant 55% to 60% share of the ASIC market. If this trend continues, the company could see its annual AI revenue rise to between $30 billion and $45 billion by 2027, given the projected market size.

Solid revenue growth is anticipated for Broadcom in the coming years, with expectations for double-digit annual increases. After closing fiscal 2024 with revenue of $51.6 billion, Broadcom appears set to maintain its status as a strong AI stock.

Examining Marvell Technology's Position

Marvell is recognized as the second-largest player in the ASIC market, with an estimated 13% to 15% market share. The company is also engaged in producing custom AI chips for giants like Alphabet, Microsoft, and Amazon.

Marvell's custom AI processors are experiencing robust demand, as evidenced by a 98% increase in data center revenue in the third quarter of fiscal 2025, reaching $1.1 billion compared to the previous year. Notably, this stellar growth has helped compensate for weaker performances in other segments, resulting in a total revenue increase of 7% year over year to $1.52 billion.

However, Marvell's outlook for the current quarter indicates rapid improvement, with forecasts suggesting revenue of $1.8 billion, reflecting a year-over-year rise of 26%. Expected earnings are also projected at $0.59 per share, demonstrating strong financial performance after only a 5% increase in the previous quarter.

One of the main contributors to Marvell's growth is its expanding AI business. Initial forecasts anticipated AI revenue of $1.5 billion; however, the company now believes this target will be surpassed due to heightened demand for their custom AI chips.

Looking to next year, Marvell expects AI revenue could reach $2.5 billion, with potential for exceeding that figure as clients like Amazon deepen their partnerships with the chipmaker. Management has indicated that they have secured capacity in their supply chain, enabling them to potentially realize improved growth.

Marvell's top line is expected to soar by 41% in the next fiscal year, resulting in projected revenue of $8.11 billion, compared to a modest 4% growth to $5.75 billion this year. Analysts maintain a favorable outlook for Marvell's growth trajectory beyond the next fiscal year.

Conclusion: Making the Choice

Both Broadcom and Marvell are positioned for impressive growth, though Marvell's expected growth rate may outpace Broadcom due to its smaller size and potential market share gains in the custom AI chip segment.

As a result, Marvell currently maintains a higher valuation relative to Broadcom. Investors seeking a rapidly growing AI stock may find Marvell appealing despite its higher price point compared to Broadcom.

Meanwhile, Broadcom's dominant market position and expansive potential within the AI chip sector suggest it remains a solid investment choice for those looking for a slightly lower-cost option.

Semiconductors, Investing, AI