The Vanguard S&P 500 ETF provides an easy entry into the stock market, heavily buoyed by AI stocks. However, it excludes promising companies like Marvell Technology, which is poised for significant growth in the AI semiconductor market. Despite profitability challenges, Marvell’s strong AI chip division and partnerships make it a compelling investment choice.
The Vanguard S&P 500 ETF (NYSEMKT: VOO) is a popular investment choice, allowing access to the broad stock market at a low expense ratio. Recent market returns have been significantly fueled by thriving artificial intelligence (AI) stocks, propelling certain companies to impressive heights in 2023 and 2024. However, not every promising AI-related company is included in this sought-after index.
While the S&P 500 represents many tech giants steering AI advancements, it still excludes significant players in the semiconductor sector. According to its guidelines, a company must be based in the U.S. and demonstrate GAAP profitability to be included. Unfortunately, this filters out some key AI stocks worth investigating, such as Marvell Technology (NASDAQ: MRVL), which presents an attractive investment opportunity.
Marvell Technology boasts a diverse product range including chips for optical communication, network switches, and processors—all vital components for AI development. Networking equipment, in particular, expedites the transfer of data in AI systems, enhancing cloud efficiency. With an aim to capture more market share from leading competitor Broadcom, Marvell showcases its potential by securing substantial contracts with major firms, including a custom chip for Meta Platforms.
The company’s custom AI accelerators are increasingly popular, with Amazon utilizing Marvell’s technology for its Trainium 2 chips, used to train significant language models. Close partnerships with other tech giants like Microsoft and Alphabet further position Marvell for growth as it anticipates market expansion for its data center products, forecasting a 29% growth rate through 2028.
Marvell is currently navigating profitability challenges, stemming from acquisitions made since 2018 that have inflated intangible asset amortization expenses. Although GAAP profits have been inconsistent, management reported a $200 million GAAP profit last quarter and is optimistic about continued profitability moving forward. Analysts predict significant adjusted earnings growth, making Marvell an enticing investment before and if it secures a spot in the S&P 500.
For those invested in the Vanguard S&P 500 ETF, Marvell Technology presents an opportunity to tap into the AI stock boom. Investing in high-potential companies is essential, and Marvell may soon join the ranks of S&P 500 members if it maintains its profitability streak. It’s a chance not to be overlooked in a rapidly evolving market.
In summary, while the Vanguard S&P 500 ETF offers broad market exposure, investors should consider Marvell Technology for its potential in the booming AI semiconductor market. Despite challenges to profitability and S&P 500 inclusion, Marvell’s impressive partnerships and anticipated revenue growth define it as an opportunity worth exploring. By diversifying portfolios with innovative companies, investors could capture pivotal growth in the AI sector.
Original Source: www.nasdaq.com
