By Adam Clark

Marvell Technology stock rose sharply on Wednesday after the chip designer raised its forecast for the market for custom artificial-intelligence chips.

In midmorning trading, shares were up 9.8% at $76.82, buoyed by a Marvell webinar on AI chips.

If the company can shake off doubts about deals with a major client, shares could go even higher.

At the webinar, Marvell raised its expectations for its total addressable market in the custom AI processor business -- to $55 billion in 2028 from $43 billion.

The improved outlook obviously pleased stockholders, who were soured last month when Marvell indefinitely postponed of its investor day because of what it described as a "dynamic macroeconomic environment." Still, the stock remains down 31% this year.

Last month, Barron's flagged that the stock might be too cheap to ignore and that Tuesday's webinar could push up shares.

Marvell surged last year when investors bet that its clients -- analysts think they include Google parent Alphabet, Amazon.com, and Microsoft -- would spend heavily on its custom chip designs as alternatives to Nvidia hardware.

Since then, however, Marvell has been dogged by worries that it might lose out on designing the next generation of Amazon's Trainium AI chips.

Those concerns might be eased after Marvell said it had won two new custom AI chip projects with "emerging hyperscalers" -- or companies with large cloud-computing infrastructure. The company didn't name the clients, but Wall Street analysts suggested the clients could be ChatGPT-developer OpenAI, Elon Musk's xAI, or similar companies.

"Despite some remaining uncertainty about the size of these programs and durability of these relationships in light of increased competition, we see a favorable risk/reward equation for shares against a backdrop of a rapidly rising AI tide," wrote William Blair analyst Sebastien Naji in a research note.

Naji kept an Outperform rating on the stock.

Investors certainly like new contracts, but they want Marvell to match Broadcom's record of long-term deals with large chip customers. That means remaining Amazon's key partner, despite speculation that the e-commerce company is lining up Taiwan's AIchip as an alternative supplier.

"While the event reinforced confidence in the company's strategic direction, it did fall short of addressing near-term concerns around CY25/CY26 Data Center revenue growth. We look forward to seeing how CY26 plays out -- including the Microsoft MAIA rollout and AWS's next-gen AI accelerator, Trainium 3," wrote Melius Research analyst Ben Reitzes in a research note.

Reitzes kept a Hold rating and $76 price target on the chip designer's shares.

Marvell didn't respond to a request for comment about its future work with Amazon and Microsoft.

Write to Adam Clark at adam.clark@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 18, 2025 11:22 ET (15:22 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.