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'
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.
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: 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.
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.
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.
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