MW Marvell has 'huge potential,' these analysts say. Here's why they downgraded the stock anyway.

By Britney Nguyen

TD Cowen analysts cited a 'dynamic of volatility and limited visibility,' saying there are cleaner narratives elsewhere in the chip sector

Marvell's stock was downgraded by TD Cowen on Tuesday.

While Marvell Technology Inc.'s custom chips and networking solutions for artificial intelligence have helped it almost triple its data-center business in two years, analysts at TD Cowen downgraded the stock Tuesday - noting limited visibility into the company's custom-silicon business, growing competition in that segment and for Marvell's networking offerings, and "cleaner stories elsewhere" in the chip sector.

Despite the company's "huge potential" in the growing total addressable market for custom chips, the analysts said a "lack of clarity on follow-on wins" with customers - particularly for Amazon.com Inc. (AMZN) and its Trainium3 chips - "raise concerns about the long-term stability of this business." After Marvell's stock $(MRVL)$ climbed about 30% in the last month, the analysts said they think the risk-reward profile is appropriately balanced.

"We think lumpiness in the custom-silicon trajectory could make it difficult for Marvell to hit Street data-center segment growth estimates," the analysts wrote in a note - potentially referring to Marvell's second-quarter earnings call, where an analyst described its guidance for its custom business as lumpy.

TD Cowen moved from a buy to a hold rating on Marvell's stock, and lowered their price target from $90 to $85. The company's shares were down more than 1% in extended trading Tuesday.

The analysts said their 2026 estimates for Marvell assume "roughly flat" growth in revenue from application-specific integrated circuits, and high-teens revenue growth for the data-center business when excluding ASICs. TD Cowen's expectations are below consensus Wall Street analyst projections.

The call on Marvell's custom chips "is based on our long-term view of the custom business" and not any specific socket, the analysts said. For example, although they "struggle to reconcile the perpetual and conflicting supply-chain commentary" about Amazon's Trainium3, the analysts noted they are not downgrading Marvell over that socket.

"However, this dynamic of volatility and limited visibility is one that we do not expect to go away, and it makes it difficult for investors to model and value Marvell's stock," they wrote.

If volumes of Amazon's current Trainium2 chips "disappoint," or new programs of chips are delayed, the TD Cowen team said they see the risk of Marvell's custom-chips business stagnating or declining next year. And despite Marvell's numbers for 2027 looking "more reasonable," they added that if Marvell's stock sees no upside in 2026, it "could face an uphill battle."

In TD Cowen's view, growth in Marvell's custom business beyond 2026 depends on factors such as reaccelerating its Trainium engagement with Amazon, or a "meaningful contribution" from a custom-silicon project with Microsoft Corp. $(MSFT)$

See more: Is Marvell's stock cheap? This $1 billion move shows the company seems to think so.

Meanwhile, the analysts see potential challenges for Marvell's electro-optics business, which refers to components used to move data faster in data centers, despite its "strong incumbent position" there. They estimate that the electro-optics segment makes up about 50% of Marvell's data-center business when excluding ASICs.

"That said, we see potential headwinds as the industry shifts towards [linear pluggable optics/linear receiver optics] to address power-draw concerns as data rates progress to 1.6 [terabits]," the analysts wrote, adding that they also see growing competition for Marvell's digital signal processors.

If Marvell's ASICs business sees flat revenue growth in 2026, TD Cowen said the rest of its data-center business will need to grow about 20% to meet Wall Street's expectations, However, the analysts see "a growing share-loss problem" there.

Therefore, they said they are waiting for better visibility from Marvell and more stability for its business before recommending the stock to investors - although they noted it is trading at a discount.

-Britney Nguyen

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September 30, 2025 18:27 ET (22:27 GMT)

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