Advanced Microdevices(NASDAQ:AMD) and Marvel Technology(NASDAQ: MRVL) have enjoyed contrasting fortunes in the stock market in 2024, with one of these names generating stellar returns while the other is in the red.
More specifically, AMD’s stock’s 13% drop this year pales in comparison to Marvell’s stock’s impressive 76% rise. Both companies are benefiting from growing demand for chips to power artificial intelligence (AI). So will Marvell still be the better AI stock of the two in 2025 as well? Or can AMD turn its fortunes around in the new year and overtake Marvell?
Let’s find out.
AMD has been playing a supporting role in NVIDIA in the graphics processing units (GPU) market for AI data centers. Still, the company’s data center business has been growing at an impressive pace.
In the third quarter of 2024, for example, AMD’s data center revenue increased 122% year over year to a record $3.5 billion.
Management says this impressive growth was driven by strong demand for its data center GPUs and CPUs (central processing units). The company now expects to end the year with $5 billion in data center GPU revenue, which would be a huge improvement over the $400 million it generated from data center GPU sales in the fourth quarter of 2023. .
Additionally, the company has continued to increase its data center GPU guidance throughout the year, up from $2 billion at the beginning of the year.
AMD is also finding success in other related niches, such as AI-enabled personal computers (PCs). This explains why the company’s revenue from its customer segment, which includes sales of CPUs used in desktop and laptop computers, rose an impressive 29% year over year in the third quarter to $1.9 billion. These two segments together produced 80% of AMD’s third-quarter gross revenue, and their strong growth allowed the company to offset weakness in other areas such as gaming and integrated chips.
The company’s overall revenue rose 18% from the prior-year quarter to $6.8 billion, while adjusted earnings rose 31% to $0.92 per share. AMD’s guidance for the current quarter is also strong. The company expects its year-over-year revenue growth to accelerate to 22% in the fourth quarter. Analysts predict AMD will exit 2024 with a 13% increase in revenue to $25.6 billion, along with a 25% increase in earnings to $3.32 per share.
However, next year will be much stronger for AMD based on consensus expectations. Its revenue is expected to increase by almost 27%, while profits are expected to increase by 54%.
It’s easy to see why analysts expect AMD’s growth to accelerate significantly next year. First, AI PC shipments are expected to increase by 165% by 2025, according to Gartner. It would be a major improvement over the 100% growth expected by 2024.
AMD is well positioned to capitalize on the growth of this market, according to its third-quarter earnings call, where it said that PC makers like HP and Lenovo “are on track to triple the number of Ryzen AI Pro platforms they offer in 2024.” . and we hope to have more than 100 commercial Ryzen AI Pro platforms in [the] market next year.
Meanwhile, AMD could also benefit from an improvement in AI GPU production by the founding partner. TSMC in 2025. The Taiwan-based foundry giant is expected to double in size by 2025, and is also expected to use its Arizona factory to manufacture AMD’s upcoming AI accelerators. Therefore, there is a good chance that the company’s fortunes on the stock market will change in 2025 thanks to AI.
Marvell Technology is a key player in the AI-focused application-specific integrated circuits (ASIC) market, a space that is growing at an incredible rate. And demand for Marvell optical equipment is also growing markedly to enable faster connections within and between data centers. These catalysts are the reason why its data center business has grown incredibly lately.
The chipmaker’s data center revenue soared 98% year over year in the third quarter of fiscal 2025 (ended Nov. 2) to $1.1 billion. The notable thing to note here is that the data center segment produced 73% of Marvell’s revenue last quarter, up from just 39% in the same period a year earlier. The company’s data center growth was so good that it was enough to boost Marvell’s overall revenue by 7% year over year despite sharp double-digit declines in its other four segments.
Management says demand for its AI-specific chips is so strong that it is on track to beat its full-year AI revenue guidance of $1.5 billion by a significant margin. Marvell forecasts $2.5 billion in the next fiscal year.
However, there is a good chance that the chipmaker could generate higher AI revenue next year as well, as it has been expanding its partnerships with major cloud computing providers such as Amazon and has added an additional client.
These catalysts are expected to be so strong that analysts are forecasting a 41% jump in revenue next year to $8.1 billion, along with 77% growth in revenue to $2.76 per share. For comparison, the company’s revenue is expected to rise just 4% in the current fiscal year to $1.56 per share, along with a 3% increase in earnings per share.
MRVL Revenue Estimates for Next Fiscal Year; YCharts data.
Therefore, there is a strong chance that Marvell stock will maintain its red-hot rally in 2025 as well.
We have seen that both AMD and Marvell are expected to grow impressively next year. Marvell is expected to grow at a faster rate than AMD, but there are a couple of reasons why the latter could become a better AI pick.
First, AMD is cheaper. The stock’s future sales and earnings multiples make it the cheapest stock right now compared to Marvell.
AMD PE Ratio (Forward), data from YCharts; PS = selling price. PE= price to earnings.
Second, AMD is a more diversified AI stock. The company supplies CPUs and GPUs not only for data centers but also for personal computers, indicating that it may have a larger addressable AI market than Marvell.
Therefore, investors looking for an AI stock that can offer a combination of value and growth may be tempted to buy AMD instead of Marvell despite the former’s poor stock market performance this year.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Advanced Micro Devices, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner and Marvell Technology. The Motley Fool has a disclosure policy.
Best AI Stock: AMD vs. Marvell Technology was originally published by The Motley Fool
