Is Marvell Technology a Bargain in the AI Market?

Many artificial intelligence (AI) stocks are trading at high valuations, making them seem too expensive to buy. However, one AI stock that has recently been struggling could be an attractive buy on weakness. Shares of Marvell Technology (MRVL) have plummeted 32% since the start of the year, and are down more than 40% from their 52-week high of $127.48. Despite the significant drop, the tech company, which develops application-specific integrated circuits (ASICs) for data centers, still presents a huge opportunity in the AI market.

Marvell's ASICs are cost-effective alternatives to Nvidia's GPUs, which are designed to serve broader, more generic needs and workloads. However, despite the potential in AI, Marvell's stock has not been performing well. Is this struggling stock a bargain buy in a booming AI market, or are there underlying issues that should deter investors?

Why is Marvell Stock Struggling?

The year hasn't been bad for AI stocks as a whole. The Roundhill Generative AI & Technology ETF has risen by 13% so far in 2025, and even the S&P 500 is up close to 2% after a significant dip in April due to U.S. global tariffs. The primary issue for Marvell is its recent performance and guidance, which have disappointed investors and analysts.

When Marvell released its results earlier in the year, the company's guidance was not as optimistic as expected. Analysts were hoping for $2 billion in revenue for the first quarter (ending May 3). Instead, the company forecasted around $1.88 billion, leading to a sell-off. While Q1 sales came in slightly better than expected at nearly $1.9 billion, and the current quarter's forecast is for around $2 billion, the stock hasn't fully recovered from the earlier sell-off.

Is Marvell's Stock Too Expensive?

Marvell's stock was already declining before the guidance miss, partly due to its inflated valuation. It was trading at a forward price-to-earnings (P/E) multiple of more than 40, based on analyst expectations. At such a high premium, the company was expected to deliver strong numbers and guidance. Currently, Marvell stock trades at a forward P/E of 26, which is slightly higher than the 23 times forward P/E of the average stock on the S&P 500.

With Marvell generating revenue growth in excess of 60% in its most recent quarter, the higher premium may be justifiable if it can maintain a high level of growth. However, the risk is that tariffs and potentially slowing economic conditions could affect its top and bottom lines in the near future. If this happens, the stock could once again become overvalued.

Should You Buy Marvell Stock?

Given the ongoing investments in AI and the need for custom AI chips, Marvell is a stock that could bounce back and generate good returns for investors who buy today. Demand for AI solutions is likely to remain strong in the coming years. The main uncertainty revolves around the economy, including the impact of tariffs and whether hyperscalers cut back on AI investments due to worsening macroeconomic conditions.

If you're willing to hold on amid these uncertainties, Marvell could be a good buy right now. While it may not be a bargain, the price may be right for long-term investors who are looking to add it to their portfolio and hold on for the long term.