1 AI Stock to Watch After Its Latest Pullback  

Marvell Technology's (NASDAQ: MRVL) stock market boom stalled after the company's fiscal 2024 fourth-quarter results (for the three months ended Feb. 3, 2024) guidance fell below Wall Street's expectations.

Since the March 7 news, shares of the business, whose chips are used in data centers, automobiles, routers, and networking appliances, have fallen. As expected, Marvell's results were disappointing for a company that had risen over 100% in the previous year. See what went wrong with Marvell last quarter and if its rising AI business makes the stock's drop a buying opportunity.

Marvell announced fiscal Q4 revenue of $1.43 billion, up 1% from the previous year. Non-GAAP earnings for the company were $0.46 per share, flat year-over-year. The company barely beat consensus predictions of $0.46 per share in earnings on $1.42 billion in revenue.

Unfortunately, the guidance failed. At midpoint, management forecasts $0.23 per share in the first quarter of fiscal 2025 on $1.15 billion in revenue. The guidance implies that Marvell's top and bottom lines will shrink in the current quarter, given that the company earned $0.31 per share on $1.32 billion in revenue last year.

Marvell needed to give better forecast for a company trading at 13.3 times revenue before the recent results announcement, significantly higher than its five-year average of 8.7. Marvell's performance are hurt by deterioration in practically all of its end markets save the data center sector. Marvell's enterprise networking revenue declined 28% and carrier infrastructure fell 38% last quarter. The consumer and automotive/industrial sectors fell 20% and 17%.

Marvell earned 46% of its sales from these four categories. Marvell expects carrier and enterprise networking sales to drop 50% and 40%, respectively, this quarter. However, the company expects carrier, enterprise, and consumer sectors to grow in the second half of the fiscal year.

The data center industry has benefited from AI. Marvell's data center business was the only bright light last quarter. Its $765 million sales, up 54% year over year, made up 54% of the company's top line. On the previous earnings conference call, management said AI drove this growth.

Marvell aims to boost its AI revenue as it ships AI chips to additional cloud clients. Marvell should benefit from long-term growth from custom AI chip demand. JPMorgan predicts a 20% yearly growth rate for cloud AI application-specific integrated circuits (ASICs).

Marvell's AI business should improve with 12% market share. That's why investors should watch this semiconductor stock and buy it on dips. The company's data center growth and other segment recovery might send this chip stock skyrocketing.

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