Diverging Views on Marvell Technology’s AI Ambitions

Market experts are offering conflicting perspectives on Marvell Technology's strategic pivot toward next-generation AI data centers. The core debate centers on whether the company's multi-billion dollar investments in optical connectivity will successfully underpin its ambitious growth targets.

The divergence was highlighted this Wednesday. RBC Capital Markets initiated coverage of the semiconductor firm with an "Outperform" rating. Analysts cited Marvell's robust position in the data center market and concrete design wins in artificial intelligence. They specifically pointed to firm orders for AWS's Trainium3 chips and the company's role as a key supplier for the upcoming Trainium4 processor.

RBC further identified the optical portfolio and custom SmartNICs as underappreciated growth engines, crucial for managing the escalating data traffic within AI computing clusters.

In stark contrast, Zacks Research downgraded the stock from "Strong Buy" to "Hold" on the same day. This move advocates for greater caution, suggesting uncertainty over how swiftly and sustainably Marvell can convert its current strategy into profitable revenue streams. This split underscores the broader market's hesitation.

Strategic Acquisitions Drive the Narrative

The root of these mixed signals lies in an aggressive acquisition strategy aimed at optical interconnection technology. Marvell has committed substantial capital to two major deals:

• The purchase of Celestial AI for $3.25 billion
• The acquisition of XConn Technologies for $540 million

These investments target a critical bottleneck in modern AI infrastructure. As hundreds of accelerators are linked across multiple server racks, traditional copper wiring faces physical limitations in performance and bandwidth. Optical interconnects are designed to alleviate these constraints.

Should investors sell immediately? Or is it worth buying Marvell Technology?

Trading activity reflected the cautious sentiment. After rallying approximately 16% over the prior 30 days, the stock paused for breath. Shares closed Wednesday at $83.05, marking a slight weekly decline of less than 1%.

Strong Fundamentals Underpin a Long-Term Bet

Operationally, Marvell continues to post impressive growth. Its most recent quarterly report showed revenue surging 36.8% year-over-year. The data center segment itself saw growth of nearly 38% in the third quarter of fiscal 2026. This momentum provides the foundation for the company's strategic shift.

However, investors are being asked to exercise patience. Management anticipates XConn will begin contributing meaningfully to revenue in the second half of fiscal 2027. For Celestial AI, the company is targeting an annualized revenue run rate of $500 million by the fourth quarter of fiscal 2028. Achieving these goals hinges on successful integration, product development, and customer adoption.

Despite Zacks' downgrade, the overarching analyst consensus remains a "Moderate Buy." This indicates that while many market participants view the AI focus favorably, they are also cognizant of the execution risks and extended timeline associated with these optical projects.

Looking Ahead: Execution is Key

For the current fourth quarter of fiscal 2026, Marvell has provided earnings per share guidance between $0.74 and $0.84. The immediate future will largely depend on how seamlessly the acquired companies are integrated and how effectively Marvell translates the architectural shift in AI data centers into firm customer orders.

From a technical perspective, the equity is currently consolidating within a broad range, establishing a base near key support levels following its recent strong advance. Market observers will be closely watching the coming quarters to see if the optical infrastructure strategy—spearheaded by Celestial AI and XConn—generates the anticipated billions in revenue and extends Marvell's growth narrative in the data center sector.