Few chip stocks have captured the AI trade quite like Marvell Technology (MRVL) this year. Shares of the picks-and-shovels AI player are up 24% in three months and nearly 164% year to date as per Seeking Alpha, with investors valuing it structurally differently than in years past. Ahead of pivotal Q2 earnings, Wells Fargo analyst Aaron Rakers sharply bumped his price target, signaling more than a one-quarter beat.
Marvell’s investment case rests on multiple reinforcing pillars, including outside Big Tech investment from the likes of Nvidia and Google, along with rising demand from hyperscalers for its custom silicon.
However, expectations are now elevated, and a routine beat might not prove to be enough. But Rakers’ latest call suggests Wells Fargo is seeing something beyond its Q2 numbers, with Marvell’s longer-term earnings power becoming the bigger story.
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Why did Wells Fargo just raise Marvell to $310?
Wells Fargo just made an aggressive reset to its Marvell stock price target, with 5-star analyst Aaron Rakers (with a 71% success rate) bumping his price target to $310 from $240, while maintaining an Overweight rating.
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The $70 increase in the target implies a 29% bump, and at roughly $230 in premarket trading on August 24, the new target implies about 35% upside.
That said, the pertinent question is what changed for Rakers to raise its price target in such emphatic fashion.
The most immediate catalyst is Marrvell’s expanded Google-parent Alphabet (GOOG) partnership, with Rakers underwriting a far bigger long-term custom-silicon opportunity.
Marvell’s agreement now covers a far wider range of chips across Google’s TPU ecosystem, including AI inference accelerators, storage controllers, network interface chips, and memory interface controllers.
Additionally, Google received warrants for up to 58.97 million Marvell shares at $206.58, with the bulk of vesting linked to custom-product purchases. That structure could potentially yield a $120 billion in purchases through 2033 based on its milestones, offering investors a remarkably tangible indication of the massive relationship that could eventually become.
In other words, the argument shifts from Marvell having a huge AI contract to it becoming one of the major long-term custom-silicon platforms for hyperscalers.
Consequently, Rakers is now looking toward nearly $11 of fiscal 2029 EPS. If those figures come to fruition, the $310 target works out mathematically to about 28 times FY29 earnings.
That is remarkably more attractive compared to its current pricing multiple of around 78-times trailing 12-month non-GAAP earnings, which is 85% higher than its 5-year average according to Seeking Alpha data.
Why has Marvell stock exploded?
Marvell Technology’s nearly 200% 6-month gain looks insane even in an AI-driven market.
What’s interesting is that, despite the choppiness in many of the poster-child AI stocks, Marvell has kept up the incredible pace from last year.
Also read: Morgan Stanley resets Nvidia stock forecast ahead of earnings
A lot of it is how Wall Street has effectively reclassified Marvell.
It was viewed as a networking and connectivity chipmaker, but now investors view it more of critical supplier in AI infrastructure, covering everything from custom AI chips to optical connectivity.
That enthusiasm is supported by its tremendous operating results, where its fiscal 2026 sales surged 42% to $8.2 billion. Moreover, its management expects fiscal 2027 sales to rise to $11 billion, while fiscal 2028 forecasts have already been bumped from $15 billion to $16.5 billion.
Custom chips have become an even bigger part of its growth story.
Marvell said that its custom-chip sales actually doubled in fiscal 2026, expects them to more than double again in fiscal 2028, with the business expected to surpass $10 billion in fiscal 2029.
CEO Matt Murphy talked about the incredible opportunity in Marvell’s Q1 earnings call,
“The level of custom engagement with key customers remains unprecedented, and we continue to be deeply involved in a broad set of significant additional opportunities.”
Why Marvell’s AI opportunity keeps expanding
Outside validation is a big part of Marvell’s growing AI opportunity.
According to Yahoo Finance, Nvidia (NVDA) invested an eye-brow raising $2 billion in Marvell back in March, forming a partnership spanning customized chips, networking, and photonics. In June, according to CNBC, Nvidia CEO Jensen Huang took things up a notch, calling Marvell the “next trillion-dollar company”.
Moreover, Marvell also benefits immensely as AI systems get bigger.
More Nvidia GPUs mean more data is moving between chips, which creates demand for quicker switches, optical connections, and networking products. Specifically, its scale-out switching business alone is forecasted to rise to $600 million in fiscal 2027, approaching a $1 billion annualized rate in fiscal 2028.
Moreover, the Celestial AI acquisition adds another growth engine for optical connectivity, while Google might see it as its strongest validation yet.
According to CNBC, the expanded Marvell partnership covers tailor-made AI accelerators and networking chips, with warrants linked to purchases that could represent up to $120 billion through fiscal 2033 if all milestones are met.
Though that’s not guaranteed sales, it helps explain why investors are valuing Marvell so differently.
What should Marvell investors watch after the rally?
Marvell’s fiscal Q2 earnings on August 27 suddenly carry a lot more weight than a typical quarterly update.
Wall Street expects $2.71 billion in revenue, up 35% year over year, with adjusted EPS of $0.93. That is virtually in line with Marvell’s own guidance of $2.70 billion in sales, plus or minus 5%, and EPS of $0.93, plus or minus five cents.
That means Wall Street is expecting a lot from Marvell, and simply hitting expectations might not be enough.
Also, a lot of the positive news, including stronger earnings, might be priced in already. That means the bigger issue is what comes next.
Management needs to show that fiscal 2027 growth can remain robust and its fiscal 2028 revenue sales still have room to move higher and if Marvell can benefit a lot more as AI clusters become larger and more complex.
Additionally, Google will be at the center of the conversation.
Investors will want greater clarity on when meaningful sales will begin to flow through its income statement and how much of that opportunity is already reflected in its forecasts.
Wells Fargo’s $310 target is a lot higher than Wall Street’s consensus of around $266, as per Seeking Alpha, and is a bet that Marvell’s earnings power will be a lot larger than previously forecasted. Though the entire thesis might not need to be proven, it does need to show bookings, customer ramps, and guidance are moving in the correct direction.
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