Shares of Marvell Technology (MRVL) plummeted 17.70% in pre-market trading on Friday, as the chipmaker's third-quarter revenue guidance and data center outlook fell short of investor expectations, raising concerns about the company's position in the competitive AI chip market.

Marvell reported second-quarter earnings that were in line with Wall Street estimates, with adjusted earnings of $0.67 per share on revenue of $2.01 billion. However, the company's forecast for third-quarter revenue of $2.06 billion (plus or minus 5%) came in below analysts' expectations of $2.11 billion. This disappointing guidance, coupled with a weak outlook for data center demand, has sparked worries about Marvell's growth trajectory in the highly competitive AI chip sector.

Investors are particularly concerned about the company's custom AI chip business, which services cloud providers such as Amazon and Microsoft. Marvell CEO Matt Murphy acknowledged potential "lumpiness" in this segment, stating that growth is expected to be "non-linear" with a stronger fourth quarter compared to the third. This has led to speculation about Marvell's ability to maintain its market share against larger rivals like Broadcom and potential new entrants in the AI chip space. The sharp sell-off reflects the high expectations built into AI chip stocks and the market's sensitivity to any signs of slowing growth in this rapidly evolving sector.