MW Marvell's stock is already down almost 50% this year. Here's why it was just downgraded.

By Britney Nguyen

Marvell was once a hot AI stock. Now, Melius Research worries about the company's Amazon business and its downscaled analyst event.

With Marvell Technology Inc.'s stock down by nearly half over the course of 2025 so far, analysts at Melius Research threw in the towel on their bullish call on Thursday, citing fears that the company won't perform as well as its peers for the rest of the year and beyond.

The chip company's shares are down 45% so far this year, and Melius analysts said "there is a risk" that its shares stay in that range "and/or do not perform as well as" most of the other semiconductor and hardware companies that the analysts cover.

The analysts moved to a hold rating on Marvell's stock $(MRVL)$, which had been a hot artificial-intelligence play in 2023 and 2024.

The chip company's stock was bucking the downgrade, up 2.9% during Thursday morning trading.

The Melius team said its previous call on Marvell's stock was based on momentum for custom silicon and upside from 2026 to 2028 on custom accelerators for Amazon.com Inc. $(AMZN)$ and Microsoft Corp. $(MSFT)$. Additionally, the prior bullish stance hinged on "confirmation of this improved visibility and upside from an analyst day in June 2025 that would outline an even bigger custom silicon [total addressable market] and customer momentum."

Rising demand for artificial intelligence shows upside for Marvell's optics business, which makes up about 20% of its sales, and the company has some benefit from "tariff pull forward," the analysts said. That refers to the idea that customers may have purchased more hardware in advance to get ahead of higher tariffs. Marvell's co-packaged optics technology for custom AI chips helps with reducing latency and power consumption.

However, they said their prior thesis for Marvell's stock has "some real flaws."

For one, Melius said revenue doesn't seem to have much upside for 2025 because of Amazon's slow ramp of its Trainium chips. The analysts see weak external demand for those.

And Melius said Marvell's association with Amazon's Trainium 3 and Trainium 4 accelerators is clouding upside for 2026 to 2028. Marvell announced an expansion of its partnership with Amazon Web Services in December to provide the company with data-center chips and custom AI products.

"The noise/controversy around potential content losses to Taiwan's Alchip is showing no sign of abating after my recent visit to Taiwan," the analysts said. "If there is no upside - and even downside, then investors need to be hoping for perfect execution and an enduring role in an unproven Microsoft accelerator line."

And Marvell changing its June analyst day to a webinar due to macroeconomic uncertainty over tariffs also has the Melius analysts concerned, because "we still don't see any real hesitation from any of the buy-rated companies we cover in our hardware and semis, in terms of willingness to get in front of investors in person."

However, Marvell is positioned to benefit from "the need for optical interconnects" with growing AI usage, and its optics business "should actually grow faster" than demand for its chips. "[I]t could offset issues we cited above in custom accelerators," the analysts said, adding that in the long run, "we do believe there will be an inevitable transition to Co-Packaged Optics $(CPO.AU)$ that introduces structural challenges down the road."

Marvell faces the risk that the digital signal-processing technology that it supplies for optics could "become less relevant and margins compress at some point later this decade," the analysts said.

"Given this secular shift, we don't believe investors will pay a significant premium for this part of the AI business since it has a ceiling long-term," Melius said.

Melius kept its price target for Marvell's stock at $66.

-Britney Nguyen

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May 22, 2025 10:40 ET (14:40 GMT)

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