Marvell shares are up 30% in a month. Why did analysts downgrade them?

After an impressive growth of 30% over the month, Marvell shares came under pressure. TD Cowen analysts downgraded the securities, pointing to the uncertainty in the business of custom chips and risks in the segment of data centers. at the pre-market on October 1, the company's securities were cheaper by more than 2%.

Analysts at TD Cowen downgraded securities of technology company Marvell, which develops semiconductors and solutions for data storage, networking and data centers, from "buy" to "hold" and reduced the target price from $90 to $85, reported MarketWatch. The new target implies the securities will grow only 1% from the closing level of trading on September 30.

After Marvell shares have risen about 30% over the past month, TD Cowen said the risk/potential ratio now looks balanced, MarketWatch writes. Analysts would like to see more transparency and stability from Marvell before recommending the stock for purchase again.

At the premarket on October 1, the company's shares were falling by more than 2%. The main trading on September 30 ended, on the contrary, with a 2% growth.

According to TD Cowen, despite Marvell's "huge potential" in the custom chip (special purpose IC, ASIC) market, there is a lack of clarity on future orders from major customers, particularly Amazon and its Trainium3 chips. This raises doubts about the long-term sustainability of the direction.

"We believe that volatility in the dynamics of custom solutions could make it difficult to meet growth projections for the data center segment," TD Cowen noted. Even company executives have previously described the business as "volatile," the analysts recalled .

Further growth beyond 2026, according to experts, depends on a resumption of active cooperation with Amazon on Trainium and a meaningful contribution from projects with Microsoft.

Analysts also note risks in the direction of electro-optics (components for data transfer acceleration), despite Marvell's strong position. TD Cowen estimates that the segment accounts for about 50% of the data center business excluding ASICs. The industry's shift to new technologies to reduce power consumption, as well as growing competition in digital signal processors, could pose challenges.

If ASIC revenue remains flat in 2026, the rest of the data center business will need to grow by 20% to meet Wall Street's expectations, analysts calculated.

Forecasts for 2026 assume near-zero ASIC revenue growth and double-digit growth in the non-ASIC data center segment - below Wall Street consensus forecasts.

The analysts emphasize that their assessment is based on a long-term view rather than individual projects. Uncertainty around Amazon's Trainium3 supply is not the primary reason for the downgrade, but demonstrates a general problem of limited visibility, TD Cowen says.

"The dynamics of volatility and low visibility will not go away, in our view, which complicates modeling and valuation of Marvell shares," the analysts pointed out.

If volumes of current Trainium2 chips fall below expectations or the launch of new chips is delayed, Marvell's custom solutions business could face stagnation or decline in 2026. Even with more realistic projections for 2027, the lack of growth in 2026 would be a serious challenge for the company.

According to TipRanks, the consensus rating for Marvell securities is a "moderate buy" based on 23 "buy" recommendations and nine "hold" recommendations. The average target price on Marvell stock is $88.20, suggesting an upside potential of 8% from current levels. Since the beginning of the year, Marvell shares have lost 23.7%.

This article was AI-translated and verified by a human editor