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Investing.com -- HSBC initiated coverage of Marvell with a Hold rating and an $85 target, saying the chipmaker’s role in AI is growing but its ASIC business is likely to trail peers through 2027.
HSBC said more than 70% of Marvell’s revenue comes from Asia, where it sees a sharper gap emerging between Marvell and Broadcom in custom silicon.
HSBC said hyperscaler capital spending is set to rise sharply through 2027, lifting the share of ASIC within that spending from 2% in 2023 to 13%. Even so, analysts said Marvell’s growth trajectory is weaker than management suggests because Broadcom’s ASIC roadmap has stronger visibility.
They added that Marvell shares have fallen 26% this year while Broadcom has gained 53%.
The bank expects Amazon to remain Marvell’s largest ASIC customer but sees limited participation in current generation Trainium chips. For the next generation, it expects Marvell to lose further share after Alchip secured most of the business.
Marvell’s next major ASIC program is with Microsoft, though HSBC does not expect meaningful revenue until at least 2027 given tight CoWoS supply next year. Its 2027 ASIC revenue estimate of $2 billion is 10% below consensus.
Marvell’s optical business remains the bigger contributor and a key offset, HSBC said. The bank expects stronger digital signal processor demand as the market shifts to 800G and begins to ramp 1.6T, leaving its 2027 optical revenue estimate 14% above consensus.
That keeps total data center revenue expectations broadly aligned with the company’s target for 18% growth.
HSBC’s 2027 EPS estimate of $3.34 sits in line with consensus. Analysts said the valuation case is balanced as ASIC underperformance is countered by optical strength, and set their target on 26 times forward earnings.