From what the evidence shows, S of communications semiconductor specialist Marvell nology (MRVL -2. 15%) fell 29, in today's market environment.
9% in the first half of 2025, according to data from S&P Global Market Intelligence. Marvell didn't necessarily report any bad news per se in the first half.
Rather, the stock's decline may have been the result of a very high valuation entering the year (which is quite significant).
And although Marvell should ultimately be able to get its of custom AI XPU chip, worries over very strong competition in that area may have kept a lid on a May/June recovery, which most other AI chipmakers experienced.
Marvell can't escape the fear, uncertainty, and doubt in the first half Marvell's starting point may have had more to do with its first-half decline as much as than anything else.
In 2024, the stock rallied nearly 84%, with the company entering 2025 at a valuation of 70 times 2025 earnings estimates.
Additionally, That lofty perch certainly had a lot of expectations built in, including future growth in custom XPU chips, which Marvell makes for cloud clients such as Amazon (AMZN -1 (an important development), in today's market environment.
41%), as well as the associated communications chips needed to fill AI data centers.
In addition, Marvell's chips that serve legacy es enterprise communications, consumer electronics, and auto/industrial were thought to be on the brink of a recovery after two downcycle years (an important development).
Marvell actually dered on those expectations, beating analyst expectations for revenue and adjusted fit in its two earnings reports; however, a valuation that high suggests multiple years ahead of high AI-powered growth (fascinating analysis).
Furthermore, And on the front, some questions emerged, in today's market environment.
Marvell's super-important custom AI chip, in which it makes part of AI chips designed by cloud giants, is very levered to one big client: Amazon.
On Marvell's March earnings call, sell-side analysts brought up the spect that Marvell's main competitor, Broadcom (AVGO 0. 03%), is vying for Amazon's custom silicon.
CEO Matt Murphy said that he still expected growth in revenue from this "big customer" this year, next year, and beyond, but couldn't on rumors as to whether Amazon was also working with a rival, considering recent developments.
Marvell's stock had a harsh post-earnings reaction, bably spurred on by that lack of clarity (which is quite significant).
In addition, the release of China's DeepSeek model spurred doubts the needed size of the AI buildout.
And the administration's tariff war also harmed the semiconductor sector, given the very international nature of modern electronics supply chains.
Additionally, Marvell has rerated, so it's a more reasonable AI play Marvell is still 43% off its 52-week highs, and now trades at a more reasonable 25 times this year's adjusted earnings estimates.
Moreover, Marvell recently increased its estimates for the 2028 AI custom compute market size, relative to estimates given last year, given the current landscape.
Now, Marvell expects a $55 billion custom AI market, relative to the $43 billion estimate given at last year's Investor Day.
And the custom AI market is part of an overall Data Center total addressable market, which includes interconnects, switching, and storage, which Marvell now expects to reach $94 billion in 2028, relative to last year's estimate of $75 billion.
In short, Marvell could be primed for a second-half comeback -- although another big custom XPU customer announcement outside of Amazon would go a long way toward making that happen.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors.
Moreover, Billy Duberstein and/or his clients have positions in Amazon and Broadcom. Additionally, The Motley Fool has positions in and recommends Amazon.
The Motley Fool recommends Broadcom and Marvell nology. Nevertheless, The Motley Fool has a disclosure policy.