Marvell’s results continue to improve, but its shares have been gutted by an all-stock acquisition and an election night shock for AI spending. Two analysts looked at the same case and came to opposite verdicts, and the gap between them is huge.
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A blockbuster deal in the optics sector and a political shock in the artificial intelligence (AI) sector have hit one of this year’s big chip winners. Marvell Technology (NASDAQ: MRVL | MRVL Price Prediction) is down 49% over the past month to $139.31 in afternoon trading. Even after this drop, Marvell stock is still up 64% year to date.
This sale is notable because the company’s operating results continue to strengthen. In the second quarter of fiscal 2027, Marvell’s revenue increased 36.5% year-over-year to $2.74 billion, and its Data Center segment reached 79% of total sales. Management set its revenue guidance for the third quarter of fiscal 2027 at $3.15 billion, plus or minus 5%, with adjusted earnings per share (EPS) of $1.10. CEO Matt Murphy said in August that “AI-related bookings remain exceptionally robust.”
How the Lumentum deal and post-election sell-off sank Marvell
On November 2, Marvell agreed to acquire optical and laser equipment manufacturer Lumentum Fund (NASDAQ: LITE) in an all-stock transaction. Lumentum’s chief executive said the combination opens up a “huge” opportunity in AI connectivity. Marvell shareholders have been less enthusiastic because an all-stock structure involves issuing a large block of new shares.
A second blow came on November 5, when chip and data center stocks sold off after Democrats took control of Congress. Voters also supported restrictions on most data center ballot measures, raising doubts about how quickly AI capabilities can be built. Marvell sat squarely in the way of this sale.
Broadcom (NASDAQ:AVGO) stock is down 18% over the past month to $298.74. In the meantime, Advanced microdevices (NASDAQ:AMD) stock is down 34% over the past month to $419.46. Both declines are steep, but Marvell fell much harder than either of its peers, suggesting transaction-related selling in addition to the sector’s movement.
Why Marvell trades differently than Broadcom and AMD
Marvell designs custom AI chips, high-speed optical interconnects and Ethernet switches, selling primarily to a handful of large-scale cloud computing companies. This ties business demand to specific customer program ramps.
AMD sells general-purpose graphics processors and central processors to a wide range of AI and computing buyers. Unlike Marvell, Broadcom pairs its custom silicon and networking chips with a major infrastructure software company, further spreading its risks.
Is Marvell desperate? Weighing the arguments in favor of the rebound against the risks
Rosenblatt analyst Sajal Dogra maintained a Buy rating and $300 price target on Marvell, arguing that the deal combines the company’s strengths in chips and electrical connectivity with Lumentum’s expertise in fiber optics as the industry shifts from electrical to optical connections. Marvell Technology expects the combined operations to save more than $1 billion annually. Most Wall Street analysts who cover the company still rate it as a Buy, and its latest quarterly results beat expectations on both revenue and EPS.
TD Cowen analyst Sean O’Loughlin took the opposite view, downgrading Marvell to Hold and reducing his price target from $350 to $175. What worries him is the structure and timing of the deal: it could be near the peak of the optical demand cycle, the all-stock structure could dilute EPS, and the two companies didn’t need to merge to collaborate. O’Loughlin explained the negative scenario in his note on Marvell:
If the cycle deteriorates heading into calendar year 2028 due to overbuilding of (optical) transceivers, Lumentum’s operating leverage is likely to start operating downward, worsening margin and EPS dilution calculations from Marvell’s perspective.
The policy adds another risk, since local pushback on data centers could slow hyperscaler spending behind most of Marvell’s sales (the same development we mapped across power, cooling and networking providers in a free AI infrastructure report). The company also has $4.963 billion in long-term debt and relies on a small number of customers, which could magnify any slowdown in their orders.
What’s next for Marvell and the Lumentum deal
The next test for Marvell is whether its next quarterly report confirms the personalized management of the business acceleration promised for the second half of fiscal 2027. Equally important is the progress made in the Lumentum deal, including how much dilution shareholders end up absorbing. Watch for signs that spending on hyperscaler AI data centers is holding up as local opposition to new projects increases.
Bulls see accelerating revenue, improved prospects and a deal that could make Marvell a leader in optical connectivity. For the bears, possible dilution, a spike in optical demand, and a political backlash against data centers outweigh this growth story. A cautious approach in trading MRVL stock could make sense while we wait for the outcome of the Lumentum deal to be resolved.
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