Key Points
Broadcom stock rallied after Marvell's investor day presentation.
The chipmaker provided bullish growth forecasts for the next couple of years.
Marvell's CEO argued that hyperscalers are increasingly adopting ASICs, which benefits Broadcom as well.
Shares of Broadcom (NASDAQ:AVGO) gained ground on Tuesday, climbing as much as 4.6%. As of 1:24 p.m. ET, the stock was still up 4.3%.
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The catalyst that sent the semiconductor specialist higher was Marvell Technology's (NASDAQ:MRVL) bullish investor day presentation.
Image source: The Motley Fool.
AI adoption continues
Marvell hosted its annual Investor Day on Tuesday, and the company's forecast gave shareholders reason to cheer. CEO Matt Murphy maintained that hyperscale and cloud operators are relying on application-specific integrated circuits (ASICs) for an increasing portion of their compute needs, as these chips can be customized to be more efficient for specific artificial intelligence (AI)-related tasks. Murphy went on to say the company's total addressable market will climb to $400 billion by 2030.
Marvell is now guiding for revenue of $12 billion in fiscal 2027 (which began in January), and $20 billion in fiscal 2028, representing growth of 45% and 67%, respectively. Moreover, its forecast ranges from $70 billion to $90 billion by 2031.
So what does this have to do with Broadcom?
Marvell isn't the only company that could potentially profit from skyrocketing demand for customizable silicon. In Broadcom's fiscal 2026 third quarter (ended Aug. 2), the company delivered record revenue that grew 86% year over year to $29.6 billion. The results were driven by strong demand for AI semiconductors, which grew 221% to $16.7 billion. Moreover, Broadcom forecast Q4 AI chip revenue of $21.7 billion, up 236%.
Marvell's forecast provided additional evidence that the AI build-out is ongoing, which will also benefit Broadcom.
At 32 times forward earnings and 19 times next year's expected earnings, Broadcom might seem a bit pricey. However, given that the company is generating high double-digit growth and riding the wave of AI adoption, I'd argue it's reasonably priced.
Danny Vena, CPA has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.