Key Points

The demand for optical networking components used in AI data centers is set to far outpace supply, creating major opportunities for Marvell Technology.
The company appears positioned for multiple years of exceptional expansion, making a trillion-dollar valuation plausible.
Marvell's forward outlook points to accelerating growth that should support meaningful share price advances.

Shares of chip designer Marvell Technology (NASDAQ: MRVL) rose sharply by 33 percent on June 2 after comments from Nvidia CEO Jensen Huang.

Huang stated that Marvell could join the trillion-dollar market cap group. While ambitious given its current valuation near 230 billion dollars, the underlying challenges Marvell addresses in AI infrastructure explain the optimism.

I expect Marvell to reach trillion-dollar status eventually. Here are the supporting factors.

Image source: The Motley Fool.

The Nvidia CEO sees Marvell Technology benefiting from the next AI infrastructure constraint

At COMPUTEX Taipei, Huang observed that memory chip shortages have already produced three trillion-dollar companies: Samsung, SK Hynix, and Micron Technology. These firms gained from surging memory demand that addresses a key limit in AI data center chips. Large AI models require extensive memory and bandwidth so accelerators remain active. Greater memory capacity allows chips to process massive data flows without interruption.

Consequently, data centers are absorbing large volumes of memory chips, with shortages projected to persist until 2028. This environment supports continued strong performance at those memory firms.

Marvell develops custom AI processors known as ASICs, storage controllers, and optical networking parts such as data center switches, Ethernet controllers, and DCI optical modules. These items face robust demand within AI infrastructure.

Custom processors enable cost-efficient inference for hyperscalers, while optical and DCI components move vast data volumes rapidly across data centers and chip clusters. This prevents GPUs from idling during AI tasks.

High-speed connectivity is therefore essential for scaling AI systems. Huang highlighted connectivity as the upcoming bottleneck, and Marvell is already addressing it. CEO Matt Murphy noted on the recent earnings call that networking has grown more critical with complex AI architectures like reasoning models and mixtures of experts, driving demand for scale-out networking products.

Murphy expects further networking demand growth. Supply of 800 Gbps optical transceivers is forecast to fall 40 to 60 percent short of demand through 2027, while 1.6 Tbps units will lag demand by 30 to 40 percent through 2029, per McKinsey. Marvell reports healthy orders and anticipates continued ramp-up. Its custom AI processor segment is also expanding quickly as hyperscalers invest heavily in internal chip programs.

These trends provide durable growth drivers. Marvell's recent results show expectations for faster expansion ahead. The question remains whether this trajectory supports a trillion-dollar valuation.

How Marvell could attain a trillion-dollar market cap

Marvell shares would need to rise roughly 4.4 times to reach that level. Its financial trajectory and guidance indicate this is achievable.

The company now projects a 70 percent increase in its DCI business this year, up from an earlier 50 percent target. It forecasts 600 million dollars in switching revenue for fiscal 2027 and 1 billion dollars in fiscal 2028. Custom silicon revenue growth is expected to rise from 20 percent in fiscal 2027 to over 100 percent in fiscal 2028.

These upgrades have led analysts to lift earnings estimates. Marvell posted earnings per share of 2.84 dollars in fiscal 2026. Projections show earnings could compound at 47 percent annually. Even assuming a slower 30 percent pace after fiscal 2029, earnings could reach 33.38 dollars per share by fiscal 2034. At 35 times earnings, the stock price could approach 1,168 dollars, representing more than 4.4 times the current level and implying a trillion-dollar valuation.

The milestone may arrive sooner if earnings growth exceeds market averages and supports a premium multiple. Investors should consider adding shares given the strong momentum this year.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.