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Marvell Technology — From Compute to Connectivity, the Optical DSP Ruler of AI Infrastructure

The rare combination of No. 1 merchant optical DSP plus No. 2 custom silicon. Dissecting the core beneficiary of the supercycle as AI infrastructure shifts from 'compute' to 'connectivity'

HHaelangdal·Founder AnalystJune 3, 202618 min readStock Analysis

Bottom Line

Marvell is a core beneficiary of the supercycle as AI infrastructure shifts from 'compute' to 'connectivity.' It holds the rare combination of No. 1 merchant optical DSP plus No. 2 custom, but earnings two to three years out are largely in the price, so returns hinge on whether the growth path materializes.

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Reader's Brief — 30-second TL;DR

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Why Now

Realizing 70%+ interconnect growth, confirming the FY2029 $10B custom path, CPO (Celestial) revenue ramp, additional XPU wins, and progress on share from 13% to 20%. The variables likely to break first are the largest customer's (AWS) order adjustment and a hyperscaler capex slowdown.

Winners ?? Losers

Winners: Marvell (No. 1 optical DSP, No. 2 custom), Coherent and Lumentum (Marvell DSP customers and optical pure-plays), Celestial (optical memory). Pressured/competing: Broadcom (full-stack rival), Alchip and GUC (Taiwanese design), hyperscaler in-housing. The optical complex de-rates if capex slows.

Watch For

Reading depth

1. The AI Infrastructure Capex SupercycleData-center capex is heading toward $1 trillion in 2028 with connectivity's share rising, placing Marvell's market in the segment growing faster than the whole.Jump to section
2. The Bottleneck Shifts — Why ASICs and Optics Grow Faster Than GPUsThe evolution of AI shifts value from compute to connectivity, and Marvell has a foot in both custom ASICs and optical interconnects, which grow faster than GPUs.Jump to section
3. Sizing the Market — Growth by the NumbersEvery market Marvell occupies — custom, optical interconnect, AI optical transceivers, and CPO — grows faster than the data-center average.Jump to section
4. What Kind of Company Is MarvellMarvell sells connectivity and custom silicon into GPU-filled data centers rather than competing with GPUs, and 76% of its revenue comes from the data center.Jump to section
5. Breaking Down the Business — Four EnginesMarvell's growth rests on its four data-center engines of custom, electro-optics, switching, and DCI, while telecom and other are a stabilizer rather than a driver.Jump to section
6. Strength in AI 'Inference' WorkloadsMarvell's four engines gain structurally as inference becomes more distributed and memory-intensive, with electro-optics and DSP tied most directly to inference expansion.Jump to section
7. Deep Dive — Optical DSP, Marvell's DominanceOptical DSP is Marvell's most defensible engine, anchored by a 60-70% merchant share and Inphi IP, with leadership in the 3.2T and CPO transition as the next gate.Jump to section
8. Market Position and Share TargetsMarvell holds the rare combination of No. 1 in optical DSP and No. 2 in custom silicon, targeting a rise in its share of the $94 billion TAM from 13% to 20%.Jump to section
9. The Competitive LandscapeMarvell's edge comes from the combination of No. 1 optical DSP and No. 2 custom silicon, sitting below the larger full-stack Broadcom and beside optical pure-plays that are both customers and partners.Jump to section
10. The 'Character' of the ValuationWhat matters is not the height of the multiple but whether the guided growth path materializes in quarterly results.Jump to section
11. RisksThe variables most likely to break first are the largest customer's order adjustment and a capex slowdown, both of which surface early in the quarterly guidance tone.Jump to section
12. ConclusionMarvell is a core beneficiary of AI infrastructure's structural shift from compute to connectivity, with the remaining question being whether its guided growth path is realized.Jump to section

1. The AI Infrastructure Capex Supercycle

The starting point of everything is hyperscaler capex (capital expenditure). Per research firm Dell'Oro, global data-center capex rose steeply from $260 billion in 2023 to $435 billion in 2024 and $593 billion in 2025. It is forecast to enter the 'trillion-dollar era' at roughly $1.022 trillion in 2028.

That is 20% average annual growth from 2025 to 2028 alone. Cumulative AI infrastructure investment over the next five years is estimated at about $2 trillion.

Data-center capex crosses $1 trillion in 2028

Figure 1. Data-center capex crosses $1 trillion in 2028. Source: Dell'Oro / Marvell Custom AI Investor Event.

The key change is 'where' the money goes. Once, general-purpose servers and GPUs were the center of spending. Now the share of the connectivity infrastructure that links chips is rising fast. The optical share of the top five cloud operators' capex is forecast to climb steadily from 2.7% in 2025 to 3.1% in 2026 and 4.1% in 2031.

As the absolute amount explodes, the optical share within it grows too. The optical market gets a 'double acceleration.'

Data-center capex is heading to $1 trillion in 2028, and connectivity's share within it is growing. The market where Marvell is strong sits exactly in the segment growing faster than the market as a whole.

Takeaway

Data-center capex is heading toward $1 trillion in 2028 with connectivity's share rising, placing Marvell's market in the segment growing faster than the whole.

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This report is provided for informational purposes only and does not constitute a recommendation to buy or sell any financial instrument. Investment decisions should be made based on your own judgment and responsibility. The analysis and opinions contained herein are based on information available at the time of writing and are subject to change.