By Dan Gallagher

The hardest thing about making custom AI chips for large, demanding customers might be the expectations that go with it.

Shares of Marvell Technology slid Thursday morning following its quarterly report. Revenue narrowly exceeded Wall Street's consensus, while the projection for this quarter was in line with expectations.

Revenue from Marvell's crucial data center segment soared 78% on the year to nearly $1.4 billion. That too was only in line with expectations, and compared with a 6% beat in the company's last quarterly report.

That last report saw Marvell's stock jump 23% in one day. Results from Broadcom a week later fueled that stock similarly.

Both companies have developed fast-growing businesses building custom AI chips for tech giants such as Amazon and Google.

Investors seeking the next Nvidia thus have flowed heavily into both stocks. Through Wednesday, Broadcom and Marvell were up 40% and 36%, respectively, for the last six months-sharply exceeding Nvidia's 10% rise.

Those gains are despite the drubbing AI stocks got in the market turmoil of the past month. Investors' sour mood didn't lower the bar enough; TD Cowen analyst Joshua Buchalter said Marvell's "lack of upside is likely disappointing in an unforgiving environment" late Wednesday.

Broadcom's stock sold off Thursday morning, ahead of its own results due later today. Analysts expect the chip maker to report $3.75 billion in AI revenue for last quarter-up 63% from a year earlier. But as Marvell has just shown, great AI growth isn't always good enough.

This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.

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March 06, 2025 10:54 ET (15:54 GMT)

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