[Opportunity Express] MRVL Continues to Bet on Optical Interconnects: Is Now a Good Time to Enter the Market?

According to the latest research reports from Morgan Stanley and Bank of America, one of the core drivers of this US stock bull market since 2023, 'semiconductor stocks,' has regained global investor interest after a recent sharp sell-off, with expectations of continued capital inflows by 2026.

Three key themes are expected to guide investment trends in the semiconductor sector: AI chip leaders, expansion in semiconductor equipment spending, and leading players in the data center optical interconnect supply chain. Notably, the optical interconnect industry is no longer just a 'supporting character' in the AI narrative but is set to remain a central theme due to persistent tight supply-demand dynamics and clear generational upgrades in 2026-2027.

Previously, the Bull Market Classroom had compiled an investment list for the optical communication industry titled "NVIDIA and Google are in a fierce competition! Meanwhile, the optical communications industry is quietly reaping substantial profits. What opportunities does this present in the Hong Kong and US stock markets?》，This week's [Opportunity Express] again highlights a promising optical communication stock -- $Marvell Technology (MRVL.US)$ 。

Core Moat: AI Cannot Do Without Marvell

Transformation Path: Shifting from Consumer Electronics to Data Centers

To understand $Marvell Technology (MRVL.US)$ , it is essential to first examine its past.

A decade ago, Marvell achieved rapid growth primarily through its disk chip, storage controller chip, and mobile SoC chip businesses, but gradually lost its competitive edge against rivals like Qualcomm and MediaTek.The turning point came in 2016 when the company began a business transformation, phasing out low-margin consumer electronics operations and making several bold acquisitions. The most pivotal of these were the purchases of Inphi (specializing in optical communication interconnects) and Cavium (focused on processors and networking).

These strategic moves proved highly precise. Through these acquisitions, Marvell gained mastery over core "data transmission" technologies. Today, Marvell is no longer a consumer electronics company but a leading player specializing in "Data Infrastructure." Simply put, any business involving "moving data, storing data, and processing data" falls within its domain.

Business Pipeline: Core Focus on Data Infrastructure

In the AI era, computing power reigns supreme, while interconnectivity remains a bottleneck. When NVIDIA introduces supercomputers comprising tens of thousands of GPUs, these chips need to exchange data at extremely high speeds. Electrical signals degrade at high speeds, necessitating the use of "light" to assist, which is where Marvell comes into play.

Marvell’s product portfolio is extensive but can be summarized in one word: data infrastructure. Its core competencies can be distilled into three key areas:

Optical Communication DSPs (Digital Signal Processors): This is Marvell's core competency (derived from the acquisition of Inphi). Within data centers, optical modules convert electrical signals into optical signals for transmission, and DSP chips act as the brains responsible for enhancing the speed and quality of data transmission.

Marvell’s latest products can support ultra-high speeds of up to 1.6Tbps. At this stage, only two top-tier players dominate this field. $Broadcom (AVGO.US)$ and $Marvell Technology (MRVL.US)$ As AI rapidly escalates the demand for data throughput, Marvell’s related products have become an essential requirement.

Custom ASIC: Unlike the standardized GPUs sold by NVIDIA, Marvell provides customized chip designs through deep collaboration with $Amazon (AMZN.US)$ ， $Alphabet-C (GOOG.US)$ ， $Microsoft (MSFT.US)$ and other cloud giants, designing tailor-made proprietary chips for them, such as the Trainium chip designed for AWS.

This is a high-margin, high-barrier business. Marvell has already secured over 10 custom projects from the four major cloud service providers and aims to achieve a 20% market share by 2028.

Ethernet Switching and Storage:This segment of the business ensures the efficient coordination between "chip design" and "data transmission" at the foundational network level. It includes high-speed Ethernet switch chips, PCIe signal boosters, and industry-leading CXL memory interconnect solutions. In particular, CXL technology can overcome bottlenecks between CPUs and memory, significantly enhancing overall system efficiency.

These three core competencies are closely interconnected, forming Marvell's "iron triangle" of business, enabling Marvell to provide comprehensive solutions ranging from chips to system-level integration.

Reasons for Stock Price Increase

This year, $Marvell Technology (MRVL.US)$ shares experienced a rollercoaster ride, falling from an early-year high of $127 to $46.9, before rebounding to $102.7.

The key factors driving the rebound in stock prices from their lows are the company’s trajectory of earnings growth and profitability improvement, as well as its strategic direction in business layout.

Earnings growth + profitability improvement

Over a longer time horizon, Marvell's financial performance has demonstrated significant growth momentum. Particularly since 2016, when the company shifted its focus to the data center sector, both revenue and gross profit have accelerated, with explosive growth observed in recent years.

In the third quarter of fiscal year 2026, the company reported operating revenue of $2.074 billion, a year-over-year increase of 37%, in line with market expectations. Gross profit reached $1.07 billion, corresponding to a gross margin of 59.7%, slightly higher on a quarterly basis; operating margin improved to 36.3%, indicating strong pricing power for its high-end technology products.

Analyzing the composition of its business, data center revenue accounted for approximately 73%, while other business segments made up about 27%.

Data centers are currently a focal point of market attention, encompassing custom ASIC operations, optical communications, switches, storage-related businesses, and more. As the primary revenue driver, data centers generated $1.518 billion in FY26Q3, representing a year-over-year growth of 38%, primarily driven by steady growth in optoelectronic interconnect products. This also underscores the success of the company’s transformation strategy, with growth highly concentrated in AI-driven sectors.

Other business areas include enterprise networking, carrier infrastructure, consumer electronics, and automotive/industrial segments, which achieved revenue of $557 million this quarter, growing 34% year-over-year. Compared to data centers, these segments exhibit slower but more stable demand, helping the company mitigate potential cyclical fluctuations associated with reliance on data centers while providing diversified income streams.

Notably, the company provided a very optimistic outlook for the future. The midpoint of its revenue guidance for the fourth fiscal quarter stands at $2.2 billion, indicating continued sequential growth and signaling that growth momentum remains strong.

Acquisition of Celestial AI, betting on optical interconnects

A major investment highlight is Marvell’s announcement of plans to acquire Celestial AI for approximately $3.25 billion, a key factor catalyzing the stock price.

Why is the acquisition of Celestial AI so important?The acquisition of Celestial AI represents a bet on next-generation 'optical interconnect' technology, which uses 'light' instead of 'electricity' to connect multiple AI chips within server racks, enhancing data efficiency and transmission distance.。

Currently, chips in AI server racks are connected by 'copper wires,' which have short transmission distances, high power consumption, and generate significant heat. The new technology essentially lays 'fiber optics' inside the racks, making it key to overcoming the current bottleneck in AI computing cluster scale.

This is a potential new market with a scale of up to $10 billion. The company expects this business to start contributing revenue in the second half of fiscal year 2028, with a goal of achieving an annualized revenue of $1 billion by fiscal year 2029. This acquisition makes Marvell one of the few companies capable of providing comprehensive optical connectivity solutions for both 'within data centers' and 'between data centers,' making it highly significant for Marvell.

Technical Trend Analysis

From a technical perspective, $Marvell Technology (MRVL.US)$ The stock price, at the weekly level,remains in an uptrend, with support referenced at the EMA50 line of $79.6. As long as the stock price does not break below this zone effectively, the long-term uptrend remains intact.

In conjunction with the daily K-line chart,referencing the EMA12 and 50-day moving averages, the stock price has fallen below the MEA50 support level for four consecutive trading days. It is necessary to observe whether the EMA12 and 50-day moving averages form a death cross signal. If a death cross is confirmed, the probability of the stock price continuing to pull back is higher, requiring investors to promptly implement profit-taking or stop-loss strategies. Additionally, the current RSI value is approximately 45, not yet in the overbought region, consistent with the current volatile pattern.

Overall, Marvell's stock price is at a critical decision-making window. If the price can rebound to above the 50-day exponential moving average (EMA) with strong trading volume, it indicates a clearer upward breakout at the daily chart level; otherwise, it suggests there may still be a risk of a deeper pullback.

For fellow investors who do not currently hold positions, if you are optimistic about Marvell’s investment potential in the future, you may wait patiently for a more definitive entry opportunity to reduce investment risks.

Risk Disclosure: This content does not constitute a research report and is provided for reference only. It should not be relied upon as a basis for any investment decision. The information contained herein does not represent a comprehensive description of the securities, markets, or developments discussed. While the sources of information are deemed reliable, no guarantee is made regarding the accuracy or completeness of the content provided. Furthermore, no assurance is given concerning the accuracy of any statements, opinions, or forecasts presented in this document.

317

52.4M Views