Chipmakers Broadcom and Marvell Technology experienced a significant decline in their stock values on Friday following quarterly reports that did not meet the high expectations of investors, who had been optimistic about their prospects in the AI computing boom.
Despite a period of surging share prices for both companies—28.5% for Marvell and 20.3% for Broadcom in 2024, fueled by investor confidence in their role in the expanding AI computing sector—Friday’s market response was decidedly bearish.
Broadcom’s stocks dropped 6% as it upheld its annual forecast, highlighting a projection of $10 billion in AI chip sales for 2024, yet failing to excite investors.
Conversely, Marvell’s shares plummeted by 9.2% after predicting lower-than-expected revenue and profit for the first quarter.
The downturn occurred just after both companies had reached record highs, underscoring the volatile investor sentiment surrounding tech stocks, especially those connected to AI computing advancements.
Companies like Broadcom and Marvell, which produce networking chips crucial for AI data processing, are seen as key players in a sector where significant investments are being made by major tech firms, including Alphabet.
Bob O’Donnell of TECHnalysis Research commented on the situation, noting that while the semiconductor industry is showing signs of improvement, the current quarter forecasts from Marvell and Broadcom did not align with market anticipations, sparking investor disappointment.
The market reaction was harsh, with Broadcom and Marvell poised to lose nearly $40 billion and $7 billion in market value, respectively.
Prior to these earnings reports, Marvell’s stock was valued at 40.21 times expected earnings, compared to Broadcom’s 27.58 and Nvidia’s 36.49.
This discrepancy highlights varying investor perceptions regarding each company’s future earnings potential.
Additionally, shares of other major tech companies like Nvidia and Advanced Micro Devices also experienced declines, with Nvidia nearing the position of the second-most valuable company, surpassing Apple.
The underlying issue for Marvell and Broadcom has been a downturn in demand from key sectors such as cloud services and telecom, attributed to an excess inventory buildup during the pandemic.
J.P.Morgan analysts pointed to “aggressive under-shipment of demand to flush out excess inventory” as a significant factor affecting Marvell’s performance.
Marvell’s forecast for the first quarter included adjusted earnings per share significantly below market estimates and a net revenue projection that also fell short of expectations.