By Arsheeya Bajwa
(Reuters) -Marvell Technology tumbled over 20% and dragged down rival chipmakers on Thursday, after an in-line revenue forecast gave investors another reason to be jittery about spending on AI infrastructure, as a years-long rally shows signs of cooling.
Stock hit a four-month low of $71.65 earlier in the day. Wall Street had looked to earnings from Marvell, a key supplier of custom AI chips to Big Tech, for signs of enduring demand that has powered U.S. market gains since ChatGPT ignited the generative AI boom in late 2022.
But the company’s current-quarter revenue forecast, $10 million above estimates, did little to allay fears about the need for big investments on AI infrastructure sparked by low-cost breakthroughs from Chinese startup DeepSeek.
Investors were expecting a more material beat from Marvell, given recent commentary on capital expenditures from some of its major customers, said TD Cowen analyst Joshua Buchalter.
More than 45 million Marvell shares exchanged hands on Thursday, compared to the 50-day average of 14 million.
Investors are now awaiting Broadcom’s results, due later on the day, as the most important supplier in the custom AI chip space, with Marvell ranked second.
Shares of Broadcom fell nearly 7%, while Nvidia slid 5%.
Nvidia’s strong first-quarter revenue forecast late last month had failed to impress Wall Street, with shares of the company slumping 8% on the day after its earnings report.
Oppenheimer analysts said investor estimates were set around $2 billion, while Marvell forecast revenue of $1.88 billion for the first quarter.
The highest analyst estimate for the company’s April-quarter revenue is at $1.94 billion, according to LSEG data.
The chip sector has also taken a hit from the tariffs imposed by President Donald Trump on countries including China. The broader Philadelphia Semiconductor Index is down 5% so far in 2025, after a gain of nearly 20% last year.
“Sentiment is rough for AI semiconductor stocks right now,” Melius Research analysts said. “The negative reaction (for Marvell) stems from what was only a slight revenue beat and raise.”
Marvell was set to lose $15 billion in market value, with its shares on track for their worst day in more than two decades. Shares rose more than 83% in 2024, but have declined about 18% so far this year.
The company exceeded its fiscal 2025 target of $1.5 billion in AI revenue, and expects to outdo its projections of $2.5 billion in AI sales in fiscal 2026, CEO Matt Murphy said on Wednesday.
J.P. Morgan analysts attributed the tepid outlook to “a slowdown in on-premise datacenter products,” referring to weaker demand for ethernet cables and fiber channels that transfer data across servers.
As Big Tech shifts spending to AI chips, demand for networking equipment — Marvell’s core business — has weakened.
Custom chips also yield lower margins than off-the-shelf processors. Marvell expects adjusted April-quarter gross margin of about 60%, a year-on-year drop of more than two percentage points.
“Investors pay for earnings per share growth, not just top-line growth,” Summit Insights’ analyst Kinngai Chan said.
At least nine brokerages cut their price targets for Marvell after the results.
(Reporting by Arsheeya Bajwa and Juby Babu in Bengaluru; Editing by Sriraj Kalluvila and Alan Barona)
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