Marvell Accelerated Infrastructure for the AI Era Event

By Patrick Moorhead - April 17, 2024

The Six Five team discusses Marvell Accelerated Infrastructure for the AI Era Event

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Transcript:

Patrick Moorhead: Marvell had an event called Accelerated Infrastructure for the AI Era Event. It was held in New York City for investors and from a top line basis, I thought it was a very positive call, sorry, video that they had.

And a couple of things to pull out here is that their AI revenue is growing incredibly well, right? Let me make sure I get the numbers right. $550 million in fiscal 24 going up to 1.5 billion in fiscal 25, that’s 272%. That growth is pretty much NVIDIA. Right. So them and NVIDIA in terms of growth rates, not whole dollars here, they’re dramatically different. So I think people kind of miss that. The second thing is we saw two new AI accelerators announced, which is super exciting. And I have to think with Hock on the board of meta, right, we’re looking at Microsoft, AWS, as Google between AI accelerators and this new Arm CPU. I have to think that this Arm CPU that really was never announced and didn’t have new on it was to detract attention from Axion launch the day before. I don’t know. We don’t do rumors here, but piecing this stuff together is pretty exciting.

The TAM opportunity, right, growing from 21 billion, and by the way, these aren’t our numbers, these aren’t my numbers, and I need to do the double click on it. Going from 21 billion last year to 75 billion in 2028, I think that’s a 28% CAGR. And then the objective there, and they were very clear and very few people do this, they said they were going to double market share for the long term, going from 10% to 20% of that TAM. If they do that, and if you buy into that 75 billion TAM, that is a gigantic number and about zero of it is integrated into their financial. One other piece of news, just to end this out, I know I’m bouncing all over here, my apologies. They said they were going to sample a 1.6 terabit coherent DSP in the data center, not across the data center, in the data center. And a few more details on silicon photonics. It looks like those acquisitions in silicon photonics and of course not that copper’s going away, it increased innovation on that as well.

Daniel Newman: Woo. Good stuff there, Pat. By the way, there were some really great presentations. I have took so many screenshots of them sort of doing the front end back-end network configuration and kind of walking through how all the connectivity that goes from in the rack out the rack. Pat, it’s really interesting because they have so much depth across obviously silicon photonics and light. And then of course ethernet. The show for me was stolen by their announcement of their XPU wins. I mean, three of the four domestic large cloud providers are going to be building custom chips with Marvell. That’s pretty exciting.

They’ve talked a lot about that business. That’s starting to come to light. You can see also how much of the market and the TAM they expect over the next five years, substantial CAGR rates. They also talked about, obviously they gave some data points about the overall growth of that particular space. There’s some slowing growth in what I would kind of call traditional compute networking infrastructure and all the growth is going to AI. That’s where all the growth is going right now. And what works really well for Marvell is that’s where they’re set to play. I mean, they’re set up very, very well to play in the connectivity and that’s where their wins need to come.

Now, the market sort of responded in a somewhat unexpected way. I thought after they kind of announced the bigger TAM, the bigger opportunity, they would’ve gotten a bit more of a positive reaction from the market where a lot of the positive reaction shifted over and went to Broadcom, which was sort of interesting. But I guess they’re seen as the one-two with Marvell being kind of the two in this particular space. And so Marvell got a big jump. Sorry, Broadcom got a big jump because I think Marvell did a really good job of explaining how big the opportunity is for Broadcom. It also goes to show how, right now I think the market, the risk on off with sort of the, we’ll talk about a little bit more on the market and the overall economy next topic, but how that’s sort of creating, it’s pouring into what the market considers to be the safest bet.

But I actually think Marvell’s a really safe bet. I think the fact is it does trade at extremely high multiple. I think it’s got the highest forward multiple out of all of the chip stocks right now, I believe. Again, don’t quote me on this. And so I do think some people obviously think maybe it’s a little bit out in front of itself, but for good reason, it’s got compute, it’s got switch, it’s got interconnect, and it’s got big opportunities in both switch and compute to grow.

And that’s where it’s going to come from, Pat. I mean, I wish they could talk a little bit more about who they’re building these for, not because you and I can’t figure it out, Pat, because we can, but because we can’t tell and they can’t tell. And then ultimately people don’t know who these companies are for sure, and then they don’t necessarily get as much credit as I think they might deserve for the things that they’re helping do. But you know what? In the end,-

Patrick Moorhead: Who does that Dan? Who does that? Broadcom doesn’t do it and,-

Daniel Newman: No. No. I just mean, I think for a company that’s not as big and doesn’t have the density, that’s a good thing that they could share that. In some cases, everyone knows Qualcomm is the only reason an Apple phone works. You need their modem.

Patrick Moorhead: Well, you can also do, you can de-lit it and you can see the Qualcomm modem and the RF function on the board with, I mean to me it’s pretty simple. Octane’s on the board of Meta. Okay. And they do ship a ton of networking silicon into Meta, but, and it’s three out of four, then it’s AWS, it’s Microsoft, and it’s Google so mystery solved.

Daniel Newman: I’m just giving my personal feelings, which are very important, Pat.

Patrick Moorhead: They are important. Feelings are important,-

Daniel Newman: I am not a robot. I think this could help. Listen, I’m just saying that Marvell’s doing a lot of really important work for a lot of important companies and sometimes I don’t know that they’re getting credit, but when you do have this high forward multiple, maybe they are getting enough credit. And so fact is, is that the connectivity, we have an entire world of brand new data centers that are going to be built from the ground up for AI. Is not going to be, while we talk about using CPUs, this whole future XBU GPU architecture is going to create a whole new world of data centers. They’re all going to need to be connected. That’s a big opportunity for a company like Marvell. Let’s talk about the economy. What do you want to talk about next?

Patrick Moorhead: No, let’s go to the economy. One thing I wanted to point out though on Marvell is they do InfiniBand as well. They can benefit and monetize that. So they benefit both.

Daniel Newman: All the optics.

Patrick Moorhead: I wanted to throw that in there. And interestingly enough, they had a really interesting take on co-packaged optics with silicon photonics, which I need to double click into and compare that to what Broadcom said.

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.