Marvell Chip Demand Falters as Cloud Giants Shift Strategies

On August 29, 2025, shares of Marvell Technology plummeted 15% in premarket trading as the chipmaker's data center demand outlook fell short of investor expectations. The company's CEO, Matt Murphy, revealed that data center revenue in the third quarter would be sequentially flat, worrying analysts about growth in Marvell's key segment that reflects demand for hardware used in AI data centers.

Marvell's revenue is increasingly driven by its custom chip business, which services cloud providers like Amazon and Microsoft who are developing in-house capabilities to reduce their dependence on Nvidia. However, a recent report indicated that Microsoft had delayed its in-house AI chip rollout to 2028 or later, contributing to the "lumpiness" in Marvell's product development schedules and spending.

Marvell is also facing growing competition from larger rival Broadcom for a piece of cloud providers' custom chip and networking businesses. Analysts believe Marvell lacks the scale of its peers and expects hyperscale customers to pursue a multi-vendor sourcing strategy, which could weigh on the company's margins.

Despite the current challenges, Marvell expects its custom business to be stronger in the fourth quarter, as custom chip orders increase again. The company is set to lose close to $10 billion in market value if the premarket losses hold, but its 12-month forward price-to-earnings ratio remains lower than Broadcom's.