UBS Group AG raises target price of Marvell Technology, Inc. (MRVL.US) to $340: AI network chips become key catalyst, CXL high-speed interconnection opens up a market worth billions of dollars.

UBS Group AG analyst Timothy Arcuri significantly raised the target price of Marvell Technology, Inc. (MRVL.US) from $230 to $340 on June 29, while maintaining a "buy" rating. The new target price implies a nearly 39% upside from the recent closing price of around $276.70. This upgrade comes as Marvell Technology, Inc. continues to make strides in the AI data center infrastructure sector. In early June, the company launched Teralynx T100, the industry's first 102.4 Tbps switch chip designed for the AI era. UBS Group AG sees this product as one of the company's core growth drivers in the future, marking Marvell's acceleration towards becoming a key player in AI infrastructure, moving away from traditional semiconductor suppliers. Teralynx T100: A "network bottleneck breaker" designed for AI Teralynx T100 is a significant product in the AI network chip sector for Marvell Technology, Inc., addressing key pain points in large AI clusters' current technology. Breakthrough in power consumption and performance. The chip uses advanced 3nm technology to create a single-piece 102.4 Tbps device with a typical power consumption of less than 1000W, providing energy savings of up to 25% compared to similar competitors. With power consumption in AI data center racks approaching 120KW per rack, network components typically consume 15% to 25% of the total rack power, making low-power switch chips a strategic necessity. Designed from the ground up for AI. Unlike traditional switching platforms, Teralynx T100 was designed from the ground up for AI architecture, achieving industry-leading power consumption and latency at this bandwidth level. By reducing AI network layers and optical link quantities, it delivers a more flat and higher-radial switch structure optimized for AI workloads. Flexible deployment capabilities. For horizontal expansion deployment, T100 supports up to 512 ports radiating, enabling operators to integrate network layers and simplify architecture. For vertical upgrade deployment, the product supports various interconnect standards and emerging protocols, including Ethernet Switch Upgrade Network (ESUN) protocol. It offers various packaging configurations, including BGA, CPC, and CPO implementation schemes. Rishi Chugh, Vice President and General Manager of Marvell's Data Center Switch Business Unit, said, "Teralynx T100 is designed for AI - it does not carry the traditional design burdens of increased power consumption and is carefully crafted to provide the deterministic performance and efficiency needed for next-generation data center infrastructure." CXL High-Speed Interconnect: The deep logic behind UBS Group AG's target price increase In addition to Teralynx T100, UBS Group AG's significant target price increase is driven by the broad market prospects of Compute Express Link (CXL) high-speed interconnect technology. CXL is a new generation high-speed interconnect standard for high-performance computing and AI data centers, enabling more efficient data sharing and resource scheduling between CPUs, GPUs, AI accelerators, and memory, and is considered one of the key foundational technologies for future AI server architectures. UBS Group AG predicts that the global CXL market potential will reach approximately $4.5 billion by 2027 and is expected to further expand to $7 to 10 billion by 2030; Marvell's revenue from CXL-related business in 2027 is forecasted to reach approximately $1 billion, driven mainly by XPU-attach solutions; UBS Group AG further raises Marvell's revenue forecast for 2028 related to CXL to approximately $2 billion. UBS Group AG points out that Marvell's CXL business primarily covers three major areas: traditional interconnect, XPU-attach, and CXL switch chips, with XPU-attach expected to become the primary source of future revenue. The company has already secured five XPU-attach projects from two large US hyperscale cloud service providers, including projects related to Alphabet Inc. Class CTPU. As a result, UBS Group AG has raised Marvell's 2027 revenue forecast from $16.5 billion to $16.8 billion and significantly increased it to $23.9 billion in 2028. Fundamentals: Data center accounts for 76%, interconnect business expected to grow over 70% Marvell Technology, Inc.'s strong fundamentals provide solid support for UBS Group AG's rating upgrade. Impressive latest financial results. In the first quarter of the 2027 fiscal year (ending May 3, 2026), the company achieved record revenue of $2.418 billion, with data center business revenue reaching $1.833 billion, a 27% year-over-year increase, accounting for 76% of total revenue. The non-GAAP gross margin was 58.9%, and the non-GAAP operating margin expanded to 35%. The company generated a record $638.8 million in operating cash flow, nearly doubling from the same period last year's $332.9 million. Strong business growth guidance. Marvell expects its interconnect business to grow by over 70% year-over-year in the 2027 fiscal year, benefiting from horizontal expansion PAM upgrades and growth in vertical upgrades and cross-domain network products. Horizontal expansion switch revenue is estimated to exceed $600 million in the 2027 fiscal year and reach an annual revenue scale exceeding $1 billion in the 2028 fiscal year. Custom chip revenue is expected to grow by over 20% year-over-year in the 2027 fiscal year, driven by flagship XPU projects and XPU-attach projects (NIC and CXL). In the optical field, TIA and drivers are projected to exceed an annual revenue scale of $1 billion in the coming quarters. Pressure on gross margins and operating leverage coexist. While the transition towards custom chips and other products has resulted in a slight decline in gross margin from 59.8% to 58.9% from the previous year, rapid revenue growth has led to operating expenses increasing slower than revenue growth, expanding operating profit margin from 34.2% to 35%. The company expects the non-GAAP gross margin for the second quarter of the 2027 fiscal year to be between 58.25% and 59.25%. Competitive landscape: Broadcom Inc. remains the dominant player in the custom chip market In the AI network and custom chip sectors, Marvell faces fierce competition from Broadcom Inc. (AVGO.US) and AMD (AMD.US). Broadcom Inc. remains the leader in data center custom chip solutions, with an estimated market share of up to 70%. Broadcom Inc.'s advanced 3.5D XDSiP packaging platform is crucial for ensuring the performance and efficiency of custom AI XPU. Industry analysis suggests that Broadcom Inc. is expected to capture around 60% of the global customized AI chip market by 2027. However, Marvell is gradually eroding Broadcom Inc.'s market share. Some analysts believe that with support from NVIDIA Corporation, Marvell, MediaTek, and other companies are quietly entering Broadcom Inc.'s ASIC market share. Marvell expects its revenue from custom AI chips to grow by 20% this fiscal year and exceed 100% growth next fiscal year. Through strategic transformation, Marvell Technology, Inc. has focused its business entirely on data center connectivity solutions. The company is currently at the forefront of the AI infrastructure capital expenditure wave, with a product portfolio covering essential elements of AI infrastructure, from switch chips to optical interconnects, custom chips, and CXL high-speed interconnects.