Research Report Interpretation: MRVL Optical AI is Coming to a Boom, Why Are High Valuations Causing Morgan Stanley's Star Analysts to Stay on the Sidelines?

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Author: Rita

Market Trend Commentary

Morgan Stanley analyst Joseph Moore updated a research report on Marvell (MRVL) on May 28. Marvell just reported a record-breaking quarterly earnings, and management significantly raised the full-year outlook, with Wall Street almost unanimously bullish. Moore is among the few who did not follow the crowd, maintaining an equal-weight (neutral) rating, while raising the target price from $172 to $195—both increases below the current stock price. He believes the AI opportunity is real, but the current price has already priced it in. For those holding MRVL or looking for targets in the AI chip and optical interconnect chain, it’s worth listening to this contrarian voice and understanding its logic. We have prepared a concise analysis and interpretation.

Three Key Conclusions

① Record quarterly earnings, management significantly raises full-year outlook.
For the quarter ending April 2026 (Marvell’s fiscal first quarter 2027), revenue was $2.42B, up about 28% year-over-year, slightly above the market expectation of $2.41B. Earnings per share were $0.80, in line with expectations. More importantly, looking ahead: management raised FY27 full-year revenue guidance to about $11.5 billion, up approximately 40%, and further raised FY28 to about $16.5 billion, up about 45%. The next quarter’s midpoint revenue guidance is $2.7 billion, up 35% year-over-year, exceeding market expectations by about $100 million.

② Moore is neutral because the stock price has already priced in growth.
The $195 target price corresponds to about 40 times the expected 2027 calendar year earnings per share (including stock-based compensation). Moore compared Marvell with Nvidia, a preferred stock: both are similarly valued (around $198 vs. $212), but Nvidia’s next fiscal year EPS is about $13, more than twice Marvell’s approximately $6. Moore believes that for Marvell to hold this valuation, it needs to see continued upward revisions in earnings, evidence of increasing market share, or large-scale shipments of custom chips—all of which have not yet materialized.

③ AI growth has two legs: one running fast, one climbing slowly.
The fast leg is optical interconnect, with Moore significantly raising FY27 growth expectations from about 50% to over 70%, with optical module products expected to reach an annualized revenue of $1 billion in the coming quarters. The slower-climbing leg is custom AI chips (designed specifically for cloud providers). Moore’s confidence in FY28 is increasing, but a new major customer will only start mass production in FY28, so this revenue is not visible yet.

Logic of equal weighting: the opportunity is real, and the price is real

Moore does not doubt the AI opportunity for Marvell; he has raised all three major growth drivers. The issue is that the stock price has already run ahead.

Behind the 40x earnings expectation are several assumptions that must all be fulfilled simultaneously: sustained growth in optical interconnect, transition of custom chips from ramp-up to large-scale shipments, and stabilization of storage and enterprise businesses. If any one of these falls behind, the valuation multiple will not hold.

Moore specifically compared Nvidia in the report. Both stocks are similarly valued, but Nvidia’s next fiscal year EPS is more than twice Marvell’s, indicating a significant difference in earnings base for the same investment. This is one of his core reasons for maintaining a neutral stance.

Which part of the AI chain is Marvell involved in?

Marvell does not produce GPUs; it focuses on enabling data transfer between GPUs and within server racks. As AI training clusters grow larger, the data transferred between chips increases, making high-speed optical interconnect critical. This is currently Marvell’s most solid area, with the optical module product line (acquired from Inphi) expected to reach an annualized revenue of $1 billion in the coming quarters. Another growth point is intra-cluster scale-up optical solutions, expected to grow from about $150 million to over $300 million.

Custom chips are another logical segment. Cloud providers want to reduce reliance on a single GPU supplier and will turn to Marvell for designing their own AI-specific chips. Moore’s confidence in FY28 is rising, driven by three factors: existing custom chip business, supporting sales, and a new major customer expected to start mass production in FY28. However, the mass production will only begin next year, so this revenue is not visible yet.

On the other side are storage, enterprise data centers, and traditional networking, which are still destocking and lack clear short-term recovery triggers.

What Morgan Stanley is betting on, not betting on, and watching

Betting on: the validity of Marvell’s optical interconnect logic, and the sustained demand from AI data centers. The target price increase and long-term outlook upgrades reflect this confidence.
Not betting on: the current stock price having further upside, which is why Moore chose a neutral rather than an overweight rating.

Signals to watch include three points: whether the optical module product line can reach $1 billion annualized revenue as expected in the coming quarters; whether the new major customer’s custom chip project can successfully ramp up in FY28; and when storage and enterprise businesses will show signs of recovery. If any one of these underperforms, the 40x valuation will need to be reassessed.

This article is a compilation and interpretation of third-party brokerage research reports by TideResearch. The ratings, target prices, earnings forecasts, and related judgments quoted are solely the opinions of the respective analysts, representing their institutions’ views, not TideResearch’s, and do not constitute any investment advice.

Please note three points when reading:

1. The target price reflects the analyst’s expectations for the next approximately 12 months, is a forecast, not a promise, and will be adjusted based on performance and market conditions.
2. Sell-side research reports tend to be optimistic, and some coverage companies have investment banking relationships with the broker.
3. The value of the report lies in its main logic and underlying assumptions, not in any specific target price. Focus on the logic, not just the price.

Markets carry risks; decisions should be made independently. This article should not be used as a basis for buying or selling any securities.

Data sources: Marvell FY2027 Q1 financial report (SEC 8-K) · Morgan Stanley research report (Joseph Moore, May 28, 2026) · Public analyst rating summaries (MarketBeat, GuruFocus, Benzinga)

TideResearch · June 2026