MRVL, AMZN and MSFT: Breaking Down the Wall Street Controversy

Key Points

• Marvell Technology stock dropped 16% despite strong earnings, largely due to broader AI stock selloffs and controversy over its hyperscaler partnerships.
• Conflicting analyst reports have fueled uncertainty, with one claiming Marvell lost key Amazon design wins, while others—including JPMorgan—strongly dispute this.
• MarketBeat consensus and post-earnings analyst targets imply 33%–44% upside, suggesting investor sentiment may eventually align with bullish forecasts.

In December, shares of Marvell Technology NASDAQ: MRVL have taken one step forward and three steps back. The semiconductor company put out a strong earnings report and outlook on Dec. 2.

Markets reacted very positively, pushing shares up nearly 8% the next day to just over $100. However, as of the Dec. 16 close, Marvell trades near $84, an approximately 16% decline after its post-earnings surge.

Below, we’ll dive into the factors that have led to Marvell’s precipitous fall and assess the current outlook, which concerns a key controversy over Marvell's role in chip development for two tech giants. 

Bad Timing: ORCL and AVGO Earnings Crush AI Stocks

The drop in Marvell shares isn't entirely company-specific. Since Dec. 11, markets have punished nearly every stock with ties to the artificial intelligence (AI) data center build-out. This came as both Oracle’s NYSE: ORCL and Broadcom’s NASDAQ: AVGO earnings disappointed investors.

Investors should take some solace in the fact that more than half of Marvell’s recent fall came after these earnings releases, over which it had no control.

AI-bubble fears aside, the more interesting aspect of Marvell’s fall surrounds damaging reports regarding its relationship with hyperscalers Amazon.com NASDAQ: AMZN and Microsoft NASDAQ: MSFT, with some believing these partnerships are in jeopardy. 

Marvell and Hyperscalers: Breaking Down the Wall Street Controversy

On Dec. 8, Marvell shares dropped 7%, as two detrimental reports hit the company. First, Benchmark analyst Cody Acree downgraded Marvell from a Buy to a Hold. Acree has a “high degree of conviction” that Marvell has lost its significant Amazon partnership. Amazon is historically Marvell’s largest custom chip buyer, and collaborated on the development of its Trainium chips. Acree believes that Marvell has lost its place in developing Trainium 3 (recently released) and Trainium 4 (in development).

However, JP Morgan Chase analyst Harlan Sur challenged Acree’s report. Sur believes that Marvell has secured all its fiscal year 2027 (FY2027) purchase orders for Trainium 3. Because Marvell’s fiscal year runs roughly a year ahead of the calendar year, that means commitments through much of 2026. He also contends that Marvell is fully involved in developing Trainium 4.

His interpretation aligns with the company’s own statements in its recent earnings call. Marvell refers to custom chips like Trainium as XPUs. CEO Matt Murphy said, “Next year's custom revenue forecast comprehends a transition to a next-generation XPU at a large customer, and I would note that we already have purchase orders for the entirety of next fiscal year's current forecast for this next-generation program." Sur and other bulls interpret this “transition” as the move from Trainium 2 to Trainium 3.

Marvell CEO Matt Murphy also appeared in a recent interview with CNBC’s Jim Cramer. He pushed back on claims that the company had “lost a huge piece of business.” This likely refers to Acree’s Trainium 3 statements. Murphy reiterated, “I have the bookings, the backlog, the orders” for the business in question. Obviously, Murphy has a vested interest in markets believing Marvell’s side of the story. Still, it is somewhat rare for a CEO to push back so aggressively on analyst reports.

A second negative report came from The Information. The outlet suggests that Microsoft is in talks to develop a custom chip with Broadcom. This also hurt Marvell's shares, as many believe the company is developing custom chips for Microsoft. There is less information around this report, but it has also received pushback from multiple analysts, including Sur.

Wisdom of the Masses: Updated Targets Eye +40% Potential in MRVL

Overall, it is difficult to say that anyone besides Marvell, Amazon, and Microsoft themselves truly knows what is transpiring. Despite the noise, Marvell’s business is performing well, and the multi-year outlook that the company provided last quarter is strong.

Notably, the MarketBeat consensus price target on Marvell near $111 implies 33% upside in shares. Among analysts who updated their price targets after Marvell’s earnings, the average target is considerably higher, at $121. This implies 44% upside and suggests that most analysts are siding with Sur rather than Acree.

Given the factors outlined above, there could be a considerable opportunity to take advantage of the recent decline in MRVL shares.