Many artificial intelligence (AI) stocks are trading at sky-high valuations and can look too expensive to buy today. But there's one AI stock that has recently been struggling, and it could be an attractive buy on weakness.
Shares of Marvell Technology (MRVL +7.19%) are down a whopping 32% since the start of the year after the company's recent performance and guidance underwhelmed investors and analysts. It's off by more than 40% from its 52-week high of $127.48.
The tech company develops application-specific integrated circuits (ASICs) which its customers can use as custom chips in their data centers. They can be cost-effective alternatives to Nvidia's GPUs, which are designed to serve broader, more generic needs and workloads.
But despite a huge opportunity in AI, Marvell's stock hasn't been doing well of late. Could it be a bargain buy in a red-hot AI market, or are there problems that should keep you away from buying this stock right now?
Image source: Getty Images.
Why is Marvell stock struggling?
It hasn't been a bad year for AI stocks as a whole. The Roundhill Generative AI & Technology ETF has risen by 13% so far in 2025. Even the S&P 500 is up close to 2% after plunging well into negative territory following the U.S. announcement of global tariffs in April.
The big issue is that when Marvell released its results earlier in the year, investors weren't thrilled with the chipmaker's guidance, and it perhaps wasn't as rosy as it should have been. Some analysts were hoping for $2 billion in revenue for the first quarter (which ended on May 3). Instead, the company's forecast was for around $1.88 billion, so a sell-off ensued.
The good news is that Q1 sales came in a little better than expected at nearly $1.9 billion. For the current quarter, management is now expecting net sales of around $2 billion. While the stock is up since the release of its most recent results, it hasn't been able to recover from the sell-off that took place earlier in the year.
Is Marvell's stock too expensive?
Shares of Marvell were already beginning to decline before its guidance miss earlier in the year, likely due to its inflated valuation. The stock had been an expensive buy, trading at a forward price-to-earnings (P/E) multiple of more than 40 (based on analyst expectations). At such a high premium, analysts are expecting the company to not only post strong numbers, but also to provide a strong guidance.
Currently, however, Marvell stock trades at a forward P/E of 26, which is only slightly higher than the 23 times forward P/E of the average stock on the S&P 500. With Marvell generating revenue growth in excess of 60% in its most recent quarter, the higher premium may very well be justifiable if it can maintain a high level of growth.
But the risk is that tariffs and potentially slowing economic conditions could affect its top and bottom lines in the near future. Should that happen, this stock could once again start to look very expensive.
NASDAQ: MRVL
Key Data Points
Should you buy Marvell stock?
Given the ongoing investments into AI and the need for custom AI chips, Marvell is a stock that can bounce back and generate good returns for investors who buy today, as demand is likely to be strong in the years ahead.
The big uncertainty revolves around the economy, including what happens with tariffs and whether hyperscalers cut back on AI investments due to worsening macroeconomic conditions. If you're willing to hold on amid all that, then the stock could indeed be a good buy right now and worth hanging on to. I don't think Marvell is cheap enough that I'd call it a bargain buy, but for long-term investors, the price may be right to add it to your portfolio and simply hang on.
