TD Cowen downgrades Marvell on weaker visibility in custom chip business

Investing.com -- Marvell Technology was cut to Hold from Buy by TD Cowen, which said there was less visibility in the company’s long-term expectations for its data centre biz.

The brokerage lowered its price target to $85, after Marvell’s recent 30% stock rally last month. It said shares after rally leaves less room for upside as growth in its custom semiconductor unit becomes harder to predict.

“We think risk/reward is balanced after the run the last month,” TD anlysts said.

Marvell’s data centre revenue has nearly tripled in two years, helped by demand for custom processors used in artificial intelligence systems and networking chips. But TD Cowen said future orders for those processors are uncertain, particularly for projects tied to Amazon’s Trainium platform and other large customers.

Marvell’s custom chip sales tend to fluctuate sharply between product cycles, making it difficult for investors to model future earnings.

TD Cowen now assumes flat revenue from that business in 2026, compared with more optimistic market forecasts.

TD Cowen also flagged risks in Marvell’s optical components business, which makes up about half of its remaining data centre revenue. It said new power-efficient designs and rising competition could erode the company’s lead in that segment.

“Low custom XPU visibility makes it difficult for us to underwrite Street’s datacenter estimates. Combined with growing competition in Marvell’s leading electro-optics franchise, we lower our estimates slightly”

The brokerage said Marvell still stands to benefit from the broader shift to AI hardware but sees clearer investment cases among rivals. It slightly cut its profit estimates for 2027 and said it prefers to stay on the sidelines until there is more clarity on new chip design wins.

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