AI demand is strong, chip company Marvell's sales surged 19% quarter-on-quarter, significantly exceeding expectations

Strong AI Demand, Marvell's Third Quarter Performance and Fourth Quarter Outlook Both Exceed Expectations. On December 3rd, Eastern Time, chip company Marvell Technology (MRVL) announced its third quarter financial report showing that the company's third quarter sales increased by 19% quarter-over-quarter, reaching $1.52 billion, higher than Wall Street's forecast of $1.46 billion; earnings per share were 43 cents, exceeding the expected 41 cents. Marvell also expects fourth quarter revenue to reach approximately $1.8 billion, higher than the expected $1.65 billion, with an earnings per share forecast of 59 cents. Company CEO Matt Murphy stated in the announcement that the main driver of growth this quarter was strong AI demand, as the company provided new custom AI acceleration chips for Amazon and other "hyperscale" data center builders, which support the operation of current large AI software models. As of the time of publication, Marvell's stock price rose over 10% in after-hours trading. So far this year, Marvell's stock price has increased by 65%. AI Product Sales Offset Decline in Traditional Business Analysts believe that Marvell is undergoing a business transformation, as the sales growth of its cutting-edge AI products in the third quarter offset the significant decline in sales from telecommunications, automotive, and other sectors. According to the report, Marvell's non-data center product sales fell from $850 million in the same period last year (accounting for 60% of total revenue) to $415 million this quarter (accounting for 27% of total revenue). Data center products such as high-speed networking equipment and next-generation custom computing chips have become a savior, with sales doubling year-over-year to $1.1 billion. According to media reports, major tech companies like Amazon, Google, and Microsoft plan to use Marvell's products to replace the expensive and supply-constrained NVIDIA and AMD processors. Oppenheimer analyst Rick Schafer expects that the sales of Marvell's four custom chips could each reach $1 billion next year. Currently, Amazon's Trainium chip and Google's Axion chip have already begun mass production. Another Amazon chip, Inferentia, is expected to start production in 2025. By the end of next year, Microsoft's Maia-2 chip will begin delivery. Murphy also mentioned on the conference call that the agreements Marvell signed with custom chip customers cover "multiple generations of products," with plans to capture 25% of the data center acceleration chip market by 2028, which would bring the company over $40 billion in revenue