Prediction: This artificial intelligence (AI) chip stock will skyrocket after December 3rd

The artificial intelligence (AI) chip market is dominated by Nvidiawhich explains why the semiconductor giant recently delivered another stellar set of results for the third quarter of fiscal 2025 (which ended October 27).

The chipmaker’s revenue rose a whopping 94% year over year to $35.1 billion, while its immense pricing power helped its adjusted profit more than double to $0.81 per share. However, the market reaction to Nvidia’s excellent results was muted. In fact, the stock has lost momentum and is in the red since its last report was released.

One reason this could be the case is Nvidia’s high valuation and concerns that the company’s growth trajectory is slowing. Margin pressure from Nvidia’s rapid production ramp-up of its new generation of AI chips is likely another reason the stock is on shaky ground despite its impressive report.

However, there is another chip stock that isn’t as expensive as Nvidia and has posted strong gains over the past three months. This company is scheduled to report its next results on December 3rd, and there’s a good chance its performance will be solid enough to give the stock a good boost.

Let’s take a closer look at this name.

Strong demand for custom AI chips has helped this chipmaker

While Nvidia is the preferred provider of graphics processing units (GPUs) used in data centers for AI training and inference, there is another family of chips that is becoming increasingly common in AI servers. Application-specific integrated circuits (ASICs) are custom chips that are different from GPUs.

While GPUs are used for general computing purposes and are capable of processing large amounts of data in parallel, ASICs are used to perform specific tasks. The advantage of ASICs is that because they are programmed to perform a specific task, they can perform that task more efficiently because they use less power.

Not surprisingly, the market for AI-specific ASICs is expected to grow 32% annually through 2030, according to market research firm Lucintel. One way for investors to make the most of this market is to invest in stocks Marvell technology (MRVL -0.98%)a custom chip designer who has seen a beautiful turnaround in his fortunes thanks to AI.

Marvell is expected to report its third quarter fiscal 2025 results after the market close on December 3rd. The company’s shares have risen an impressive 33% since the release of its previous quarterly report on August 29th. This increase is due to rapidly growing demand for Marvell’s custom chips, helping to offset weak demand in other segments.

Specifically, the chipmaker’s total revenue fell 5% year-over-year to $1.27 billion in the fiscal second quarter. Non-GAAP earnings (adjusted) fell to $0.30 per share from $0.33 per share in the year-ago quarter. However, a huge 92% year-over-year increase in Marvell’s data center revenue to $881 million overshadowed declines in revenue and profit.

The company expects revenue of $1.45 billion for the fiscal third quarter, which would represent a slight improvement over the same period last year. Consensus estimates are that Marvell will end the current fiscal year with revenue of $5.54 billion, which would be nearly flat from the same period last year. Additionally, earnings are expected to decline to $1.46 per share from $1.51 per share in the previous fiscal year.

The good thing is that Marvell’s sales and profit figures are expected to increase significantly in the next few financial years.

MRVL sales estimates for next fiscal year data from YCharts

Marvell’s long-term prospects are solid

Given the health of the custom AI chip market, it’s easy to see why analysts expect Marvell to step on the gas. The company expects to end fiscal 2025 with AI revenue of $1.5 billion, a figure that is expected to increase to $2.5 billion in fiscal 2026. More importantly, Marvell predicts a major increase in its addressable market thanks to AI. The company expects the total data center addressable market (TAM) to grow to $75 billion in 2028 from $21 billion in 2023.

Marvell points out that $43 billion of this TAM is due to growing demand for custom computing chips. Another $26 billion will come from the data center switching and interconnect markets. It’s worth noting that Marvell is making progress in both areas. The company expects a third of its AI revenue in the current fiscal year to come from custom computing chips, with the remainder coming from the AI-focused area of ​​data center connectivity.

More importantly, Marvell was able to attract new customers for its AI chips. This was evident from CEO Matt Murphy’s comments on the previous earnings call: “Our custom AI silicon programs are progressing very well, with our first two chips now entering mass production. We have already won the development of new custom programs, including projects with the.” “The new Tier 1 AI customer that we announced earlier this year is also well on its way to achieving key milestones.”

Therefore, there is a good chance that Marvell can deliver better than expected results and top it all off with a sunny outlook. That’s why buying this stock before December 3rd could be a smart move, as it’s currently trading at 37 times forward earnings, which isn’t all that expensive considering how quickly the bottom line will change over the next few years should grow in years.