Comparing AI Chip Market Competitors: Broadcom vs. Marvell Technology

As the demand for artificial intelligence (AI) chips escalates, the semiconductor industry has seen substantial growth. Notably, the PHLX Semiconductor Sector index has surged with gains of nearly 23% in the ongoing year of 2024, underlining the vibrant market for AI technology. Within this sector, two prominent companies, Broadcom and Marvell Technology, focus on a specific market segment - the custom AI chips. Despite the industry's overall upturn, the share price increases of Broadcom and Marvell have remained moderate, at 19% and 10% respectively.

Custom AI chips are slated for significant growth, and both Broadcom and Marvell are poised to capitalize on this trend. Market research points to a considerable expansion of the application-specific integrated circuits (ASICs) sector, which could make up 30% of a projected $182 billion AI chip market by 2027. This forecast opens a potential $55 billion market opportunity specifically for Broadcom and Marvell.

The case for Broadcom

Broadcom boasts a leading position in the ASIC market, commanding an estimated 35% market share. Significant revenue generation is in sight for Broadcom, with expectations to rake in $10 billion from AI chips just this year, following a year-over-year quadrupling of AI chip revenue in their first fiscal quarter. Renowned clients such as Meta Platforms and Alphabet contribute to Broadcom's robust sales figures, and projections suggest that Broadcom's AI chip revenue could soar up to $16 billion by 2025 and $20 billion the following year. Some industry analysts even speculate that with just one additional client, Broadcom could potentially increase its AI chip revenue a staggering fivefold to $50 billion annually.

Broadcom's adeptness in securing major clients, such as Amazon, Apple, or ByteDance, bodes well for its potential to become an even more significant force within the AI chip industry.

The case for Marvell Technology

While Marvell Technology also concentrates on the custom AI chip segment, its current market presence is eclipsed by Broadcom's. Marvell anticipates a minimum of $1.5 billion from AI chip sales in the current fiscal year, a figure substantially lesser than Broadcom's projection. However, Marvell expects this figure to increase by $1 billion in the following fiscal year, indicating swift progress. Marvell currently faces market challenges in various sectors such as enterprise networking and carrier infrastructure, which manifests in a 12% year-over-year decrease in overall revenue. Contrastingly, Broadcom has sustained 11% organic growth in the same period.

Nonetheless, Marvell's dedication to the AI chip market is evident in its data center revenue, which saw an 87% jump due to AI chip demand. With an anticipated stabilization of its declining segments later in the year, market analysts predict a bright future for Marvell's AI chip revenue growth.

The verdict

Given the scale and growth trajectory, Marvell's smaller operations suggest that AI has the potential to have a pronounced impact on its growth compared to Broadcom. Additionally, Marvell's current lower valuation in the market could signify a more affordable investment opportunity with the prospect of higher growth, potentially making Marvell the more attractive AI stock among the two contenders.

Broadcom, Marvell, AI