Marvell’s Strategic AI Bet: A Long-Term Play for Patient Investors

Marvell Technology US5738741041

Marvell Technology is making a decisive move to strengthen its position in the artificial intelligence sector with the acquisition of Celestial AI. This strategic purchase, valued at $3.25 billion and partially paid in stock, is centered on a critical component for next-generation data centers: high-speed chip-to-chip data links. However, the financial payoff from this deal is projected to materialize years down the line, presenting a classic conflict between long-term strategy and short-term investor expectations.

The core asset Marvell gains is Celestial AI's optical interconnect technology. This innovation is considered foundational for future data center designs, enabling the transfer of data between components with exceptional bandwidth and energy efficiency. The driving force here is the insatiable demand of AI workloads, which consume not just immense processing power but also require exponentially faster internal data center connections. By integrating this technology, Marvell is fortifying its presence in the infrastructure layer poised to benefit from the ongoing AI boom.

A Distant Horizon for Revenue

While strategically sound, the acquisition's timeline tempers immediate excitement. According to company projections, Celestial AI is not expected to contribute meaningfully to revenue until the second half of the fiscal year 2028. Management has forecast an annualized revenue run rate of $500 million for the fourth quarter of that fiscal year.

Market analyst Cody Acree of Benchmark projects an even larger impact later, suggesting a quarterly "exit rate" of $250 million could be achieved by Q4 of fiscal 2029, which would annualize to approximately $1 billion. This extended timeline underscores a central question for the market: What premium are investors willing to pay today for benefits that may not be fully visible until 2028 or 2029? This uncertainty is reflected in the mixed market reception following the deal's announcement.

Diverging Views from the Analyst Community

The acquisition has elicited a spectrum of responses from financial research firms:

• Bullish Perspectives: Institutions like Stifel Nicolaus and Deutsche Bank have raised their price targets on Marvell shares to a range of $114 to $125, emphasizing confidence in the long-term synergistic potential.
• Cautious Stances: Conversely, Citigroup, Rosenblatt, and Needham have lowered their targets. As of February 5, 2026, Benchmark maintained a "Hold" rating, specifically citing the delayed revenue contribution as a key factor.

Investment activity has also been varied. Institutional investors adjusted their holdings in the third quarter: SBI Securities increased its position by 53.2%, while Jones Financial Companies boosted its stake by 76.9%. In contrast, Thrivent Financial for Lutherans reduced its holding by 52.8%. A notable insider transaction was also recorded: Executive Vice President Mark Casper sold 5,000 shares on January 5, 2026, decreasing his direct reported ownership by roughly 20%.

The stock's performance over the past year highlights the prevailing pressure, with shares down 45.27% over the last 12 months (yesterday's closing price: €62.82).

Solid Operational Performance Provides Support

Operationally, Marvell's recent results have been robust. In its quarterly report dated December 2, the company posted revenue of $2.07 billion, a year-over-year increase of 36.8%. Earnings per share came in at $0.76, slightly surpassing the consensus expectation of $0.74. For the upcoming quarter, management provided an EPS guidance range of $0.740 to $0.840.

The next significant milestone will be the quarterly results scheduled for release on March 4, 2026. This report will offer crucial insights into how near-term integration costs are impacting the bottom line and how demand for data center silicon is evolving in the current market.

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