Nvidia stock could start rising this month if it delivers solid results on May 28, but those looking to buy an AI chip stock should take a closer look at another name.
This custom AI chip manufacturer is witnessing a major bump in its revenue and earnings thanks to AI, a trend that's likely to continue.
Artificial intelligence (AI) has given the stock market a big boost in the past couple of years. Companies and governments around the globe have been rapidly adopting this technology thanks to its disruptive nature, especially considering the significant productivity gains that it is projected to deliver in the long run.
Market research firm IDC predicts that each dollar spent on AI could generate $4.60 worth of value for the global economy in 2030. As a result, it won't be surprising to see the strong demand for AI hardware and software continue over the next five years. Nvidia has been one of the pioneers in the field of AI, as the company's powerful chips have allowed customers to train and deploy large language models (LLMs) and applications.
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Nvidia stock could get a nice shot in the arm in May...
The chipmaker is the biggest AI chip company out there, witnessing a whopping 114% increase in revenue in fiscal 2025 to $130.5 billion. Importantly, Nvidia has the ability to sustain its impressive growth momentum for a long time to come, thanks to a massive addressable market. However, the stock has been under pressure this year, thanks to restrictions on exports of its chips to China, the rising competition in the AI chip market, a potential drop in AI infrastructure spending, and the fallout of the tariff-fueled trade war.
The good part is that investors can buy this potential long-term winner at an attractive valuation right now, especially considering that it could regain its mojo in May following the release of its upcoming results. However, there is another AI chip company that looks like a better buy than Nvidia.
Let's take a closer look at that name.
...but this high-growth company is worth buying hand over fist
Marvell Technology(NASDAQ: MRVL) designs application-specific integrated circuits (ASICs) and networking chips that are used in data centers, enterprise networking, telecom networks, and automotive, industrial, and consumer applications. The company's data center business is now its biggest source of revenue.
Marvell got 75% of its top line from sales of data center chips in the fourth quarter of fiscal 2025 (which ended on Feb. 1). The segment's revenue shot up a remarkable 78% year over year on the back of strong AI-fueled demand. Marvell points out that its AI revenue during the fiscal year was well above its original target of $1.5 billion, and it expects to "significantly exceed" its $2.5 billion revenue target for fiscal 2026.
This massive spurt in Marvell's AI revenue is set to drive outstanding growth in the company's revenue and earnings. Consensus estimates are projecting a 42% spike in the company's revenue in the current fiscal year, to $8.2 billion. That would be a major improvement over the 5% revenue growth it clocked in the previous fiscal year. Even better, analysts are expecting Marvell's healthy revenue growth to continue over the next couple of fiscal years as well.
This is set to translate into terrific bottom-line growth as well. Marvell's earnings are forecasted to jump by 78% in the current fiscal year to $2.80 per share, followed by healthy growth over the next couple of years.
It's easy to see why analysts are expecting such impressive growth from this company. After all, the demand for custom AI processors and chips has been increasing, as they're more efficient in carrying out the specific tasks they're designed for when compared to general-purpose computing chips such as graphics processing units (GPUs). As a result, custom AI processors can help lower operating costs, which is why the likes of Amazon and others have been developing these chips with Marvell's help.
Marvell points out that it currently has two high-volume customers for its custom AI chips. It expects to gain more business from these customers in the future, as they are likely to adopt the next generation of Marvell's custom AI processors. Marvell has brought onboard a third customer as well, to whom it will start shipping its AI chips next year.
Looking ahead, there's a good chance that Marvell could attract even more customers for custom AI chips. That's because the company is pushing the envelope on the product development front and has developed a 2-nanometer (nm) node for manufacturing custom AI chips and networking components. Marvell currently offers chips based on a 3nm platform, and the move to the smaller 2nm process should ideally result in 15% performance gains and 30% lower power consumption.
This new process node should put Marvell in a solid position to make the most of the fast-growing custom AI chip market, which it projects is on track to grow at a 45% annual rate through 2028 to $43 billion. Moreover, the company expects to corner a bigger share of this fast-growing niche with the help of its next-generation chips. Specifically, Marvell management believes that the company's share of the data center chip market could double to 20% in 2028 from 10% in 2023.
So, don't be surprised to see Marvell maintaining a healthy pace of growth beyond the next couple of fiscal years. It's trading at less than 23 times forward earnings, compared to Nvidia's forward earnings multiple of 26. So investors can buy Marvell at very attractive levels right now, considering the big earnings jump it's expected to deliver. They may not want to pass up such an opportunity this month, as Marvell's long-term outlook indicates that it could deliver solid stock price upside for a long time to come.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
