The Six Five team discusses Marvell Q1 2024 Earnings.
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Transcript:
Daniel Newman: Let’s talk a little bit about Marvell, Pat. You and I went out to San Jose and actually had time to spend some time with the executive team there. Didn’t talk about earnings, of course, because it was the day before, but it’s always good to see Chris Koopmans and team out there and appreciate their hospitality, but what we were asking about is, is there an AI story here from Marvell? So obviously, Marvell saw a bit of a Cinderella story over the course of the ’20-’21 year as the custom silicon for cloud and networking.
The company really has a ton of the content required for anything optical, and it’s been a huge success in that particular industry, but as the market pulled back, semiconductor slowed down, they were a company that got stuck with a little bit of inventory. They had some slowdowns related to the companies they were providing to and they saw their stock fall by 50%, 60% during that period of time. So it was this big peak and then this big goalie. The question marks were, what’s going to be next for the company? I think everybody had a question, is there an AI opportunity?
So this quarter, Matt Murphy, CEO, came out and the company had a beat, but it wasn’t a massive beat. I think it was a few cents on the earnings. It was a few dollars on the revenue, but they came out and they basically said they have about 200 million dollars right now in revenue related to AI, and they believe that they’re going to be able to double that in the next year. Now, that’s okay, but it was 200 million to 400 million. You’re talking about a company that did about 1.3 billion this quarter. So it’s still a fairly small part of the company’s overall revenue stream.
Having said that though, I think the signal of intent was really big. So first of all, the claims to double, much like Jensen saying a four billion dollar up on the guide is probably a very conservative number. I think that they know they can do a lot better than that. Pat, I think that the thing is Nvidia with InfiniBand and with NVLink has a fairly tight grasp on the networking of all of the GPUs, but in the future, there’s going to be two things happening. One is we got to connect all these racks up for all this AI, and second of all, there are going to be second, third, and fourth players that are going to enter the market that are going to need high performance optical connectivity that’s going to run rack to rack.
Marvell is positioned really well there to grow and to gain business. Like I said, since you’re really talking about growth from a fairly small start at about 200 million, I think that that 400 million is conservative and they can easily see that double or triple in the years ahead of that. This earnings though, Pat, they got a 25% bump on this result. Now, let’s be candid what this is about. This isn’t all about Marvell’s story yet, but this is all about the fact that Marvell was successfully able to connect its role in the future of AI to the growth that you’re seeing for Nvidia and for AI training and ultimately for inference.
I think that’s really important, the company’s acquisition strategy, it’s overtures into fiber, it’s ability to really grow in the data center and, of course, that it has connective tissues across the stack. They’ve moved heavily into 5G. They’ve moved heavily into automotive. The ability to build silicon for networking and high performance networking is going to be a big thing.
Pat, I think you and I really sat down and even as you and I talked we’re like, “There is a tailwind and a pull through effect that all this demand for AI training is going to have, and companies like Marvell, like Broadcom are likely going to be the biggest beneficiaries.” So I think the market agreed with us. I think everything else about this quarter’s earnings were just business as usual, but it was really, the fact is everyone’s ears were open following the drafting tailwinds of Nvidia’s. Ken Marvell capitalized. Matt Murphy, Chris Koopmans and team, they were able to capitalize. They saw 20 plus percent gains following their earnings, and I think it’s just the start for their AI story.
Patrick Moorhead: Yeah. Great analysis there, Dan. I was on Street Signs last night talking Nvidia, and also, they asked me what companies are related. I brought up Marvell and I tried to very simply explain that when it comes to training, GPUs in isolation don’t add a lot of value. You have to network these things together to make it look like one planer or surface. Those interconnections between those GPUs need to be really, really fast, and that’s where Marvell comes in is they’re the company that networks the GPUs together.
I wrote a column on Meta as an example. Their research cloud is 160,000 GPUs that are networked together. I’m not saying that that’s Marvell or it’s not, but that just gives you an idea how important it is to pull those together. Marvell did double down on growth in certain areas and was crushing it in those highest growing areas, and whether that was the cloud, whether that was 5G, they do really well in automotive as well, and that’s chugging along just nicely, but this AI training, I’ll call it training now, inference like the letter boost is a good one.
Now, it’s not just networking, okay? Marvell has capabilities not only in custom SOCs, but also opportunities in full scale AI ASICs. So I know the company is talking a little bit about what to expect with these, but they have designed wins in both ASICs and in AI-focused SOCs, which I think is going to surprise a lot of people out there. That’s just the gift that keeps on giving, right? That’s a multi-year engagement. That’s multi-year benefits that’s coming down the road. Oh, by the way, all that custom work on the front end, you’ve got NRE. So it’s not like you get to the altar and even if they pull the plug, there’s zero. At least you’re making some money on the NRE, not nearly as much as if they would’ve taken over the line, but I can’t see any US-based CSP with a custom piece of AI silicon that helps lower the cost of AI anybody pulling the plug on that. So congrats, Marvell. It’s good to see it happening and looking forward to covering this in the future.
Daniel Newman: Yeah, and thanks for pulling together about the ASICs and custom SOCs. That is a big part of the business. Probably a little farther down the road before it’s going to be as impactful on the AI side, but it is something I think I saw some numbers and into ’25 could be a very interesting part of the business as well.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
