Marvell is best known for making custom chips - but an analyst notes there's arguably more potential in supporting components and optical networking
Marvell's stock is up 178% so far this year.
Marvell Technology's custom chips and connectivity offerings have made it a major beneficiary of the data-center build-out - so much so that one analyst is touting the company as a paragon of "accelerating multiengine growth."
Marvell's (MRVL) end-to-end portfolio for data-center connectivity "layers on more customers and products each year," Bank of America analyst Vivek Arya said, and he sees that driving rapid growth in the company's revenue and earnings per share.
Arya said Marvell sees its "XPU attach" business as "much stickier" than its XPU business, meaning customers are returning to and engaging with those offerings more. Marvell refers to its custom chips as XPUs, and to the components that support them in data centers - such as networking and storage controllers - as XPU attach.
If each custom chip has one or more sockets - or places on the processor where it connects to other components - and each component can sell for an average price of between $500 to $1,500, Arya said that Marvell could see $30 billion in revenue from XPU attach by the end of the decade. By that point, he expects the total addressable market for supporting chip components to reach between $60 billion and $65 billion - or even more.
The analyst noted that Marvell expects its lead custom-chip customer, Amazon Web Services (AMZN), to continue growing each year. The chip maker also plans to start ramping custom products with Microsoft (MSFT) next year, which he said will help Marvell gain share in the market for custom chips. Arya sees the total addressable market for custom computing offerings, including both chips and the components that support them, reaching about $300 billion by the end of the decade.
Meanwhile, he said, Marvell stands to win the market for scale-up optical networking "regardless of how customers choose to build," given its portfolio of co-packaged optics, near-packaged optics and near-packaged optical components. Scale-up networking connects several processors together to work as a singular, more powerful chip.
Arya added that Marvell doesn't see a threat to its optics business from Amazon's recent announcement to work with Qualcomm (QCOM) on optical-connectivity components.
Marvell's stock was down fractionally Friday, but is still up nearly 178% so far this year.
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-Britney Nguyen
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