Shares of Marvell Technology (MRVL 1.40%) have soared by almost 200% this year, as of this writing. The company received a major vote of confidence from one of the most authoritative voices in artificial intelligence (AI). Earlier this month, Jensen Huang, the CEO of Nvidia (NVDA 0.93%), claimed that Marvell would be the next trillion-dollar company. Huang has put his money where his mouth is. In March, Nvidia invested $2 billion in Marvell Technology. However, the AI chipmaker's market cap is currently $237 billion, and several much larger corporations are also capitalizing on AI, including Advanced Micro Devices (AMD 0.29%). Could Marvell really overtake AMD (and others) to become the next trillion-dollar company?
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AMD's market cap tops $836 billion. Even with much more modest returns than Marvell over the next few years, AMD should reach $1 trillion first. Perhaps Marvell could generate Nvidia-like returns through 2030 while AMD actually loses value, but that's unlikely. AMD has also performed well this year — its shares are up 126% to date — and the company is riding a tailwind that may keep its momentum going through the end of the decade (and beyond). AMD is one of the leaders in the CPU (Central Processing Unit) market. As the AI industry shifts to agentic AI — self-directed systems that can organize, plan, and execute tasks with limited human intervention — the demand for CPUs should soar.
AMD argues that through the first phase of the AI revolution, dominated by chatbots like ChatGPT, the ratio of CPUs to GPUs (Graphics Processing Units) was between 1:4 and 1:8. However, the advent of AI agents will bring it closer to 1:1, or perhaps an even higher number on the CPU side. Huang has also expressed extremely bullish sentiment about agentic AI, and Nvidia is looking to tap into the demand it will create for CPUs. That's why Nvidia launched Vera CPU; it expects $20 billion in stand-alone CPU revenue through the end of the year.
Elsewhere, Intel (INTC 0.81%), another leader in the CPU market, is also seeing incredible momentum and soaring demand for its products. So, we have multiple data points that confirm AMD's view of the industry. And even though it is facing stiff competition, there are several reasons it could be one of the major winners. First, AMD and Intel have dominated this market for a long time and have built deep expertise, as well as extensive partner ecosystems that give them a competitive advantage.
Second, AMD has gained market share on Intel in recent quarters, and has shown even stronger pricing power than its peer, partly thanks to a more sound manufacturing strategy (Intel has faced issues on that front that have slowed down its business). AMD now expects the server CPU market to grow at a compound annual rate (CAGR) of 35% over the next few years and reach $120 billion by 2030. That's almost double the 18% CAGR it had predicted at the end of last year. AMD is well-positioned to ride that wave, beat the market, and become a trillion-dollar stock before 2030 and long before Marvell ever does so.
Marvell may not reach $1 trillion before AMD, but there are good reasons to share Huang's general enthusiasm for this company. It is a leader in the design of Application-Specific Integrated Circuits (ASICs), custom chips designed to handle specific workloads. Hyperscalers and other companies are increasingly relying on these chips to help reduce their reliance on Nvidia's hardware, while also cutting costs and boosting margins, since they can sometimes be more cost-effective than comparable GPUs.
Further, companies like Amazon and Alphabet are exploring selling their custom chips to external customers, a bullish sign for Marvell. Meanwhile, the company continues to post strong financial results and expects its revenue growth to accelerate each quarter of its ongoing fiscal year. Marvell could continue performing well over the next few years as demand for ASICs soars. The company may not become the next trillion-dollar stock, but it is a great pick for investors looking to capitalize on AI.
Prosper Junior Bakiny has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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