Following Marvell Technology Inc.’s results announcement, which further hurt the artificial intelligence market, Nvidia Corp.’s stock was one of many semiconductor stocks that fell during Thursday morning trading.
Thanks in part to a multiyear deal with Amazon.com Inc. that some analysts believed would put the business on a far better development path, Marvell (MRVL) seemed to solidify its status as an AI darling around three months ago. In light of this, expectations were high before Marvell’s report, and Wall Street wasn’t satisfied with the company’s meager performance and outlook.
“Boy, sentiment is rough for AI semis right now,” Melius Research analyst Ben Reitzes explained in a client letter. He went on to explain that buy-side expectations were probably higher by at least $100 million. “For the immediate-term, the negative reaction stems from what was only a slight revenue beat and raise,” he said. With its outlook, Marvell only outperformed the consensus estimate by roughly $10 million.
Investors have been more critical of AI firms whose stock has increased recently. Last week, Nvidia (NVDA) also had a beat-and-raise performance; nevertheless, during the next session, its stock posted its biggest post-earnings decline since 2018.
Marvell’s stock dropped 20% on Thursday, and share prices of other AI companies are also declining. Shares of Advanced Micro Devices Inc. (AMD) were down more than 2%, and shares of Nvidia were down more than 3%. ASIC-affiliated Broadcom Inc. (AVGO), which will release its own results after the closing bell, had a more than 6% decline in its share price.
In Thursday morning trading, every component in the PHLX Semiconductor Index SOX is down.
Now, Nvidia’s stock is down 16% for the year, Marvell’s is down 34%, and Broadcom’s is down 22%.
Jordan Klein, a desk-based analyst at Mizuho, spoke of a “crisis of confidence” on Wall Street. Even while cloud providers have solid capital-spending outlooks and semiconductor companies have good fundamentals, investors are “believing more and more that AI stocks just cannot work no matter how much they beat or guide.”
He believes that AI chip makers may have a better second half of the year, particularly in light of Nvidia’s July-quarter earnings announcement.
But for the time being, everyone’s attention will be on Broadcom’s post-close earnings. Klein says the good news is that, compared to Marvell, buy-side expectations for Broadcom appear to be lower.
However, if the business continues to provide earnings and guidance that are in line with that arrangement, will Broadcom be saved? “Probably not,” wrote Klein. “Once more, it appears like the smoke in the movie theater is getting thicker every day. False alarm, or a fire threatening to burn you alive in your chair? Would you rather wait to find out?
