The investment narrative regarding the Artificial Intelligence boom so far has predominantly focused on who provides the essential hardware. In this high-stakes competition, two semiconductor powerhouses—Broadcom (AVGO) and Marvell Technology (MRVL)—are intense rivals in the most vital sectors of the AI infrastructure development: logic chips and networking. On paper, they operate in the same markets, but in the stock market, they exist in separate spheres since the debut of ChatGPT in November 2022:
- Marvell stock appreciated +105%
- Broadcom appreciated +600%
Currently, Broadcom boasts a $1.8 trillion market capitalization, while Marvell hovers around $80 billion. The differences in multiples and scale elucidate part of the narrative.
- Broadcom: 41x forward earnings for 2026, Marvell: 24x forward earnings
- Broadcom Revenue (FY): >$63B, Marvell Revenue (FY): approximately $8B
Where The Hyperscalers’ Real Money Is Flowing
Hyperscalers are investing tens of billions in custom silicon, moving away from general-purpose GPUs to more effectively manage their costs and lessen dependence on Nvidia, which effectively leads the AI computation domain.
The two most significant layers are Custom AI compute (ASICs) and High-speed networking. Both Broadcom and Marvell Technology participate in this space, but Broadcom operates with significantly larger customer scale, deeper hyperscaler penetration, and wider product range. The revenue and margin disparity clarifies the power dynamics.
- Broadcom’s chip division generated $9.2B last quarter, reflecting 26% year-over-year growth, and boasts 67% EBITDA margins (enhanced by software).
- Marvell: around $2B in total revenue, 37% year-over-year growth, but only 15% operating margins.
While Marvell is growing at a faster pace, Broadcom is expanding at scale.
Why Broadcom’s Scale Is Structural
This scale advantage is intrinsic to Broadcom. Why?
- It is one of the largest purchasers of advanced wafer capacity and possesses pricing power that Marvell simply cannot rival.
- It has preferential access at TSMC through long-term volume agreements.
- Such a scale results in permanent margin strength.
Custom AI Chips (ASICs): Similar Tech, Different Tier
Both companies design high-quality custom AI chips, but Broadcom commands the upper echelon.
Both produce specialized AI ASICs. From a technical standpoint, Marvell is robust, yet Broadcom is the obvious market leader. Broadcom’s clientele represents a significant competitive barrier.
- Broadcom has secured diversified wins at Google with its Tensor Processing Units, which are gradually presenting a challenge to Nvidia. Additionally, other significant players like Meta and China’s ByteDance are also among its clients.
- Moreover, The Information revealed that Microsoft is considering Broadcom as a possible future chip design ally.
- This results in increased volumes and extensive integration into numerous AI roadmaps simultaneously.
- Marvell’s custom silicon narrative is closely tied to Amazon Web Services, making it more vulnerable to a single customer’s capital expenditures cycles and design decisions.
On Monday, Benchmark analyst Cody Acree downgraded Marvell to Hold, indicating that Amazon was likely to transfer future Trainium 3 and 4 designs to Alchip. Neither Amazon nor Marvell has validated this. For the time being, it remains speculative, but it underscores the inherent instability of revenue concentrated around a specific customer for custom silicon.
High-Speed Networking: Control vs Participation
Both Broadcom and Marvell Technology supply the networking silicon that connects tens of thousands of accelerators into a unified AI training framework.
- Broadcom’s Tomahawk and Jericho platforms have become the de facto standard for hyperscale Ethernet switching. Marvell competes in Ethernet physical layer devices, DSPs, and optical interconnects.
- However, Broadcom holds architectural control over the construction of AI clusters, not merely revenue scale.
Broadcom’s Software Upside
The primary reason for the valuation gap is Broadcom’s extensive, high-margin Infrastructure Software division, highlighted by its recent acquisition of VMware. Post-acquisition, Broadcom abolished perpetual licenses, enforced a subscription-only model, and implemented product consolidation along with price hikes. The outcome?
Exceptionally high software margins and 67% adjusted EBITDA margins at the company level, along with approximately 40% operating margins. Such predictable software cash flow acts as a financial foundation, allowing the market to grant Broadcom a premium multiple even in challenging chip cycles. The software component is becoming increasingly pertinent to AI as well. Broadcom is leveraging VMware to create “AI factories” utilizing GPU virtualization and workload management.
Marvell Technology exists on the opposite spectrum. Marvell is a pure-play semiconductor firm, with revenue almost solely reliant on hardware sales. What does this entail? Reduced structural margins and complete exposure to semiconductor cyclicality, even amidst robust growth periods.
Marvell’s Blueprint to Close the Gap
To justify a valuation multiple more in line with its competitor, Marvell must implement a bold strategy focused on growth, technical distinction, and financial prudence.
1. Seizing Control of the Optical Future
For interconnections, copper is encountering severe physical limitations regarding power dissipation and speed. The future of AI interconnections is light, rather than metal. Marvell is wagering on Co-Packaged Optics (CPO) and photonic fabric as the next potential bottleneck in AI.
- The acquisition of Celestial AI is a direct effort to secure technology and expertise in photonics. Why Marvell Wants To Buy Celestial AI
- There’s a chance that this could represent a significant, platform-defining transition in AI infrastructure. If successful, Marvell could surpass incumbents.
2. Reduce Dependence on AWS
Marvell’s custom ASIC narrative is closely linked to Amazon Web Services. A major customer equates to high revenue concentration risk.
- To see a re-rating, Marvell needs another Tier-1 hyperscaler success.
- A second significant design win would affirm its competitive edge, mitigate revenue volatility, and immediately alter how the market evaluates its risk profile. Even if recent Trainium reports are proven unfounded, this incident highlights the necessity for Marvell to secure a second Tier-1 hyperscaler alliance to ensure long-term growth confidence.
3. Build Trust, Not Just Technology
- Broadcom’s pricing strategies post-acquisition at VMware serve as a subtle reminder to hyperscalers of the risks associated with vendor concentration.
- This situation opens an opportunity for Marvell to establish itself as a strategic counterbalance to Broadcom, not only in terms of performance but also in long-term reliability as a partner.
4. Demonstrate Scalable Profitability
Growth alone will not bridge the valuation divide. Margins also need to increase. Marvell’s reported operating margins for the first nine months of the year stood at roughly 15%, compared to 40% for Broadcom.
Marvell must continue to enhance high-margin data center revenues while enforcing strict cost management. The market is anticipating visible improvements in operating leverage and a reduction in the profitability gap compared to Broadcom. Without margin growth, re-rating simply won’t occur.
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