Jim Cramer on Why Marvell (MRVL) Plunged

Marvell Technology, Inc. (MRVL) reported a strong fiscal second quarter, with revenue increasing 37% year over year to $2.739 billion and non-GAAP diluted earnings of $0.94 per share. Despite this, the stock fell more than 10% the following day, leading Jim Cramer to question why investors punished the company, whose AI business continues to accelerate.

The sharp reaction was partly due to the extremely high expectations, as the stock had been performing well. Additionally, more details emerged about Marvell's collaboration with Google, which involves the development of chips to rival NVIDIA's offerings. However, this collaboration is expected to yield results only in the future, years down the line.

Marvell's CEO, Matt Murphy, noted that AI-related bookings remained exceptionally robust. The company's Custom silicon business is also experiencing significant growth, with strong demand in Connectivity and a notable acceleration in the second half of fiscal 2027. The main risk for Marvell lies in the pace at which the Custom business ramps up.

If the ramp is slower than expected, the financial benefits may be delayed. Institutional positioning increased in the second quarter, with 96 hedge funds holding MRVL at the end of the period, up from 79 in the first quarter.