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Alright, let's get one thing straight: I'm seeing a lot of headlines about Marvell (MRVL)... Alright, let's get one thing straight: I'm seeing a lot of headlines about Marvell (MRVL) stock popping because of Amazon's Trainium business. Six percent? Big deal. The real question is, are we drinking the Kool-Aid here, or is there something actually solid under all the hype?
The Amazon Effect: Blessing or Curse?
Amazon's Trainium2 is supposedly a "multibillion-dollar business" with insane growth. Okay, fine. But let's remember who we're talking about. Amazon could announce they're selling unicorn tears for $10,000 a bottle, and the market would probably jump. They've got the branding power to make anything seem like the next big thing.
And this "Project Rainier" supercomputer? Half a million Trainium2 chips sounds impressive until you realize that Amazon probably uses more electricity powering its break room refrigerators. Seriously, are we supposed to be blown away by scale alone?
Marvell manufactures these Trainium chips, so offcourse they benefit. It's like being the shovel salesman during the Gold Rush. Doesn't mean you're gonna strike gold yourself. The analysts are drooling, of course. J.P. Morgan's Harlan Sur is slapping an "Overweight" rating with a $120 price target on MRVL. Give me a break. These guys get paid to be optimistic.
Out of 34 analysts, 22 are saying "Strong Buy." Two say "Moderate Buy," and ten are at "Hold." Hmm, a slight majority are on board, but that many holds? That's analyst-speak for "I don't wanna stick my neck out too far."
The Numbers Game: Smoke and Mirrors?
Marvell's custom ASIC segment is projected to grow 18% to 20% in 2026. Okay, that's decent. They're bragging about $75 billion in lifetime revenue potential from custom designs. "Potential" is the key word there. My potential to win the lottery is pretty high too, if I actually bought a ticket.
Then there's the operating margins, expanding 870 basis points YoY to 34.8%. Impressive, I'll give them that. Earnings per share grew 123% in fiscal Q2, more than double the revenue growth rate. That's a good sign...or is it? What levers are they pulling to juice those numbers? Layoffs? Accounting tricks? I'm not saying they are doing anything shady, but you gotta wonder.
And the revenue projections? From $5.77 billion in fiscal 2025 to $16 billion in fiscal 2030? Adjusted earnings jumping from $1.57 per share to $6.94? These are projections, people! Five years is an eternity in the tech world. Remember what everyone was projecting for the metaverse in 2021? Yeah, me neither.
Marvell's data center business is now 75% of their total revenue, up from 34% just two years ago. All their eggs are in one basket, ain't they?
Oh, and MRVL stock trades at a forward earnings multiple of 30.6x, higher than its 10-year average of 27x. So, it's overvalued. Got it.
I'm not saying Marvell is a bad company. They make the chips that power Amazon's AI ambitions. That's a big deal. But this feels like a classic case of Wall Street getting ahead of itself, chasing the shiny object, and ignoring the fundamentals. Amazon Is Giving Marvell Technologies Stock a Huge Boost. Why, and Should You Buy MRVL Here? - Barchart.com
But hey, what do I know? Maybe this time it's different. Maybe Amazon really has cracked the code to AI dominance, and Marvell is along for the ride.
So, What's the Real Story?
It's a sugar rush. A quick hit of good news that's obscuring the long-term risks. Marvell is riding the AI wave, sure, but waves crash. And when this one does, a lot of investors are gonna be left with a nasty hangover.