Artificial intelligence is driving a surge in value across tech companies, but few have turned their investments into real profits thus far. Nvidia stands out as a success story here, managing to balance AI-related costs with substantial returns. Now, Marvell Technology, another chip firm, is gaining traction as an emerging player, drawing comparisons with Nvidia itself.

Since May 2023, Marvell’s stock has surged from USD 40 to about USD 80, doubling in value. But the numbers behind this growth reveal even more: Marvell’s first two quarters this fiscal year show steady, AI-driven expansion, with positive projections for the months ahead.

In its Q2 fiscal 2025 earnings, Marvell posted USD 881 million in data center revenue, marking a 92% increase year-on-year (YoY) and an 8% sequential rise. Data center revenues are soaring, showing a 187% jump YoY in Q1. Marvell is forecasting another 10% growth this quarter.

While Marvell’s legacy businesses are slipping, data center expansion has strong demand. Big players downstream, like Microsoft and BlackRock, continue to channel capital into data center infrastructure, recently setting up a USD 30 billion fund for future data centers. This unrelenting investment keeps Marvell’s products in demand, underpinning investor confidence.

Leveraging Nvidia’s momentum

Marvell’s growth story is intertwined with Nvidia’s. As generative AI stokes high demand for Nvidia’s advanced GPUs, the optical modules in which Marvell specializes are similarly surging. This is key: in the world of high-performance computing (HPC) for AI, Marvell’s products are essential, enabling the continuous architectural upgrades that data centers need for efficient data flow and processing.

Marvell plays a critical role in the HPC supply chain, manufacturing optical chips and data processing units (DPUs) that power data transfer between AI servers in data centers. The value chain starts with upstream optical chip producers like Marvell and continues to midstream players like TFC Optical Communication, Zhongji Innolight, and Eoptolink Technology, which assemble modules and develop control systems. Downstream clients include cloud providers, telecom operators, and internet giants.

In Q1, market research firm Omdia observed that data communication modules saw four consecutive quarters of growth. YoY, the segment’s share of total optical module revenue rose from 46.1% in 2023 to 53.7% in Q1 2024.

According to Tianfeng Securities, optical chips—the core components that handle optical-to-electrical conversion—make up 40–60% of total module costs, while electrical chips account for 10–30%.

Marvell’s overall Q2 fiscal 2025 revenue reached USD 1.27 billion, marking a 5% decline YoY. But strong demand, bolstered by solid orders, offers a promising outlook. Marvell secured stable orders for its 800G PAM and 400ZR interconnect products in Q2, and plans to scale up production of 800G DSP products. Additionally, Marvell is ramping up production of its new 1.6T PAM4 DSP, poised to fuel faster growth trajectories.

Recently, Nvidia’s CEO Jensen Huang confirmed that Blackwell chips will enter mass production in Q4. Market data suggest that each device based on Nvidia’s Blackwell platform could require nine 1.6T optical modules, further boosting Marvell’s demand.

In terms of profitability, Marvell’s Q3 projections include a 14% increase in sequential revenue, with adjusted operating expenses expected to rise only 2%. Matt Murphy, president and CEO of Marvell, said in an earnings call that strong growth in cloud business should more than offset declines in enterprise and local data center sales.

Marvell’s leadership has shared optimistic AI-driven revenue forecasts. At an event it held in April, the company revealed that its AI-related revenue reached USD 200 million in fiscal 2023, expected to surpass USD 550 million in fiscal 2024. For fiscal 2025, Marvell anticipates total sales from connectivity and custom compute to top USD 1.5 billion, with AI-related revenue projected to reach over USD 2.5 billion in fiscal 2026.

Building through acquisitions

The DPU market has come into prominence only recently. Nvidia made headlines with its USD 6.9 billion acquisition of Mellanox Technologies in 2019, rebranding DPUs as one of the “three pillars” of future computing alongside CPUs and GPUs.

Huang has argued that CPUs, GPUs, and DPUs will form the future foundation of data centers. Under this vision, CPUs will handle general processing, GPUs will power accelerated computing, and DPUs will manage data flow.

Initially a storage company, Marvell has transformed itself into a communications and HPC leader through strategic acquisitions. A management overhaul in 2016 set the stage, followed by Marvell’s USD 6 billion acquisition of Cavium in 2018, marking its entry into the DPU market.

Between 2020 and 2021, Marvell further bolstered its portfolio through the acquisitions of Inphi and Innovium, enhancing its DSP and optical module capabilities. These deals also fortified Marvell’s data center and 5G interconnect offerings, enabling it to serve hyperscale data centers.

As telecom giants consolidate, Nvidia, Marvell, Broadcom, and AMD now dominate the emerging DPU industry.

Meanwhile, overseas optical chip makers are drawing attention to Chinese module assemblers, many of whom are stepping up to join international supply chains. In fact, seven of the world’s top ten optical module manufacturers are now Chinese, collectively commanding over 50% of the market share, with firms like TFC, Zhongji Innolight, and Eoptolink even supplying Nvidia.

China’s top three optical module assemblers have seen impressive growth in the secondary market this year, with shares of Eoptolink surging from RMB 47 (USD 6.6) to RMB 147 (RMB 20.6), Zhongji Innolight rising from RMB 79 (USD 11.1) to RMB 168 (USD 23.5), and TFC climbing from RMB 63 (USD 8.8) to RMB 104 (USD 14.6).

Financial reports for the first half of 2024 indicate that Zhongji Innolight’s net profit hit RMB 2.33 billion (USD 326.2 million), a 300% YoY increase, while Eoptolink posted RMB 865 million (USD 121.1 million), up 204.5%, and TFC achieved RMB 641 million (USD 89.7 million), up 184.24%.

According to customs data, China’s optical module exports reached RMB 17.47 billion (USD 2.4 billion) from January to May, up 80.1% YoY. LightCounting projects a 40% increase in optical module sales in 2024.

China’s leading module assemblers continue to benefit from the strength of upstream players like Marvell and Nvidia. As long as global cloud providers maintain robust server investment, Nvidia, Broadcom, and Marvell stand to gain from the AI boom, with Chinese assemblers positioned to capture downstream growth.

KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Song Wanxin for 36Kr.