FORGET THE HERD, FOLLOW THE ENGINEERS
(MRVL), (MSFT), (NVDA), (META), (AVGO)
Back in 1981, when I was tramping through the backcountry of Japan researching semiconductor factories, a wise old engineer told me something I've never forgotten: "Young man, in technology, the custom always beats the commodity."
Four decades later, watching Marvell Technology's (MRVL) strategic pivot to custom AI silicon, that weathered engineer's words are ringing in my ears.
The recent tech selloff triggered by Microsoft's (MSFT) canceled data center leases sent most chip stocks tumbling. The market, doing what it does best, threw the baby out with the bathwater.
While the herd was stampeding for the exits, I was busy loading up on MRVL shares. Wall Street's short-term memory loss is your gain, folks.
Marvell delivered a knockout 27% year-over-year growth in Q4'25, and that's just the appetizer. The main course is coming as their custom silicon strategy hits full stride.
Let me tell you why this matters.
Remember when Nvidia was just "that gaming chip company" before it became the AI powerhouse worth more than most countries' GDP? Marvell is following a similar trajectory but with a crucial difference - they're not trying to be everything to everyone.
They're the special forces team designing precision instruments for the AI revolution while Broadcom (AVGO) plays the role of the 800-pound gorilla servicing hyperscalers. Different animals, different hunting grounds, both eating very well.
Here's what the nervous nellies are missing: management is betting the farm on data center product development, expecting to blow past their $2.5b AI systems revenue target for eFY26.
When executives redirect R&D dollars like this, they're not guessing – they're following customer purchase orders. I've been in this business long enough to know that's the financial equivalent of smoke signals from the Vatican - big news is coming.
Need more evidence? I've got it straight from the engineering trenches.
During my tech conference rounds last month, three different chip engineers cornered me to rave about Marvell's 800G PAM and 400ZR DCI products.
If that sounds like alphabet soup to you, just know this: they're selling tomorrow's technology while competitors are still perfecting yesterday's.
Their Electro-Optics products and Teralynx Ethernet switches aren't just growing – they're flying off the shelves.
Meanwhile, the Meta Platforms (META) partnership they announced in Q4'25 is pure gold.
With Meta planning to drop $60-65b in eFY25 on Llama 4 development, Marvell just secured a VIP pass to the most expensive tech party of the decade.
So what does all this mean for Marvell's numbers? Let's get concrete.
For Q1'25, I'm forecasting $1.9b in revenue with EPS of $0.62/share. Their margins will expand throughout eFY26 as volumes ramp up.
Financially, Marvell is rock solid. They closed FY24 with $948mm in cash, $4b in debt, and a leverage ratio of 1.58x – their best position since Q4'23. In fact, Fitch upgraded their credit rating to BBB with a stable outlook.
In layman's terms: the books look cleaner than a surgeon's operating room.
Yes, inventories increased to 111 days on hand ($1,030mm). Normally, I'd raise an eyebrow at this. But in today's supply-chain-from-hell environment, extra inventory is like having an extra gas tank in the desert – suddenly the smartest idea ever.
I rang up a hyperscaler CTO friend last week (no names, but his company has more users than most countries have citizens).
His take? "General-purpose computing for AI is like using a sledgehammer to hang a picture. We're moving to custom solutions wherever possible." That's Marvell's sweet spot.
MRVL shares have been beaten like a rented mule, creating an entry point with fair value at $204/share by my analysis. Even my conservative case gets you to $157 – still double today's price.
This reminds me of standing atop Mount Fuji with a Japanese tech CEO in 1978.
Looking down at Tokyo, he explained how his company was shifting from consumer electronics to specialized components the world's biggest brands couldn't manufacture themselves.
Those who spotted that transition early made fortunes. Specialized excellence always commands a premium – in mountaineering, in technology, and certainly in today's custom silicon market.
