Advanced microdevices (AMD -2.83%) And Marvell Technology (MRVL 10.79%) have seen contrasting fortunes in the stock market in 2024, with one of these names making stunning gains while the other is in the red.
More to the point, AMD’s stock’s 13% decline this year pales in comparison to Marvell’s stock’s impressive 76% rise. Both companies are taking advantage of growing demand for chips to power artificial intelligence (AI). So, will Marvell remain the best AI Actions both in 2025 as well? Or can AMD turn things around in the new year and surpass Marvell?
Let’s find out.
The case of AMD
AMD played the supporting role has Nvidia in the AI data center graphics processing unit (GPU) market. Despite this, the company’s data center business has seen impressive growth.
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 is 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 significant improvement over the $400 million in revenue generated from the sale of these chips in the fourth quarter of 2023.
Additionally, the company has continued to increase its data center GPU forecast throughout the year, from $2 billion at the start of the year.
AMD is also seeing 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 processors used in desktops and laptops, increased 29% year over year in the third quarter, to reach $1.9 billion. These two segments together generated 80% of AMD’s revenue in the third quarter, and their strong growth allowed the company to offset weakness in other areas such as gaming and embedded chips.
The company’s overall revenue increased 18% from the corresponding quarter last year to $6.8 billion, while adjusted profit 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 that AMD will leave 2024 with a 13% increase in revenue to $25.6 billion, as well as a 25% increase in earnings to $3.32 per share.
Next year, however, will be much stronger for AMD, in line with consensus expectations. Its revenue is expected to jump nearly 27%, while profits are expected to increase 54%.
It’s easy to see why analysts expect AMD’s growth to accelerate significantly next year. First, AI-enabled PC shipments are expected to increase by 165% in 2025, according to Gartner. This would be a major improvement over the 100% growth expected for 2024.
AMD is well-positioned to capitalize on growth in this market, according to its third-quarter earnings call, in which it said PC makers such as HP and Lenovo “are on track to more than triple the number of platforms” Ryzen AI Pro forms that they offer in 2024″. and we expect to have more than 100 commercial Ryzen AI Pro platforms in the market next year.
Meanwhile, AMD could also benefit from improved AI GPU production by its foundry partner. TSMC in 2025. The Taiwan-based foundry giant is expected to double in size in 2025, and it is also expected to use its Arizona manufacturing plant to make AMD’s upcoming AI accelerators. There is therefore a good chance that the company’s fortunes on the stock market could improve in 2025 thanks to AI.
The case of Marvell technology
Marvell Technology is a key player in the AI-driven application-specific integrated circuit (ASIC) market, an industry that is growing at a breakneck pace. And demand for Marvell’s optical equipment is also growing significantly to enable faster connections within and between data centers. These catalysts are the reason why its data center business has seen incredible growth in recent times.
The chipmaker’s data center revenue increased 98% year-over-year in the third quarter of fiscal 2025 (which ended Nov. 2) to $1.1 billion. The remarkable thing to note here is that the data center segment generated 73% of Marvell’s revenue last quarter, compared to just 39% last year. The company’s data center growth has been so good that it was enough to increase Marvell’s overall revenue by 7% year over year, despite strong double-digit declines in its other four segments.
Management says that demand for its AI-specific chips is so strong that it is on track to far exceed its full-year AI revenue forecast of $1.5 billion. Marvell is forecasting $2.5 billion in the next fiscal year.
However, there is a good chance that the chipmaker could also generate higher AI revenue next year as it has expanded its partnerships with major cloud computing providers such as Amazon and attracted an additional customer on board.
These catalysts are expected to be so powerful that analysts predict a 41% increase in revenue next year, to $8.1 billion, as well as 77% growth in net income, to $2.76 per share. For comparison, the company’s revenue is expected to grow just 4% in the current fiscal year, to $1.56 per share, along with a 3% increase in earnings per share.
Estimates of MRVL revenues for the next financial year; data by Y charts.
So there is a good chance that Marvell stock will maintain its red-hot rally in 2025 as well.
The judgment
We found that AMD and Marvell are expected to see impressive growth next year. Marvell is expected to grow at a faster rate than AMD, but there are several reasons why the latter could prove to be a better choice in AI.
First, AMD is cheaper. Sales of stock and multiples of forecast profits making it the cheapest stock right now compared to Marvell.
AMD PE ratio (forward), data by Y Charts; PS = sales price. PE = price/profit.
Second, AMD is a more diversified AI stock. The company provides processors and GPUs not only for data centers but also for personal computers, indicating that it may have a larger addressable AI market than Marvell.
So investors looking for an AI stock that can deliver a mix of value and growth might be tempted to buy AMD over Marvell despite the former’s poor stock performance this year.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, Amazon, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner and Marvell Technology. The Mad Motley has a disclosure policy.