US NEWS: Marvell Technology shares dropped sharply in early trading Monday, falling as much as 9.2 percent, after new reports raised serious concerns about the companys grip on two of its most important custom AI chip contracts.
According to industry sources, Microsoft has opened discussions with Broadcom to design its next generation of custom artificial intelligence accelerators, a role that investors had widely expected Marvell to keep. At the same time, analysts at Benchmark downgraded Marvell to a Hold rating, stating they now have high conviction that Amazon Web Services has awarded the designs for the upcoming Trainium 3 and Trainium 4 chips to Taiwan based Alchip Technologies instead of Marvell.
These custom silicon programs with the largest cloud providers have been central to Marvells growth story in the AI boom, so the potential loss of both Microsoft and Amazon business in the same quarter sent investors heading for the exits despite generally positive longer term views from many other analysts.
The stock has been unusually volatile over the past twelve months, recording more than forty daily moves of at least five percent. In that context, traders appear to see todays news as meaningful but not necessarily a permanent derailment of the companys outlook.
The sell off comes just days after a more upbeat reaction to Marvells latest quarterly results. Only five trading sessions ago, the stock rose 5.2 percent when the company reported adjusted earnings of 76 cents per share, beating Wall Street expectations, on revenue of 2.07 billion dollars that matched forecasts and grew nearly thirty seven percent from a year earlier. Management also guided to approximately 2.2 billion dollars in revenue and 79 cents in adjusted earnings per share for the current quarter, numbers that came in ahead of consensus estimates.
Year to date, Marvell shares remain down roughly twenty one percent. At recent prices near 89.66 dollars, the stock sits almost twenty nine percent below its fifty two week high of 126.06 dollars reached in January. Still, a five thousand dollar investment made five years ago would be worth slightly more than ten thousand dollars today.