HSBC Upgrades Marvell to 'Buy' Rating, Raises Target Price from $85 to $300

Marvell Technology's stock price rose nearly 8% before the market on Tuesdayas HSBC upgraded its rating on the semiconductor company from "hold" to "buy," lifting its target price significantly from $85 to $300. The core logic is that the AI networking "supercycle" is driving growth in the company's optical interconnect business.

HSBC analyst Frank Lee pointed out in a report that since March 30, Marvell's stock price has surged by 124%, compared to a 71% increase in the SOX index. Despite this, he believes the market still significantly underestimates the sustainability of the company's optical interconnect revenue growth and the potential for upward revision. Even with a high probability that the upcoming fiscal year 2027 first quarter results will not greatly exceed expectations, there is still considerable potential for market consensus expectations to be raised in the next two years.

“The upcoming fiscal year 2027 first quarter results are unlikely to significantly exceed expectations, but we believe the market still underestimates the revenue growth from optical interconnects, which will drive a revision of market consensus expectations in the next two years.”

Lee also mentioned that with the ongoing memory shortage driven by the demand for proxy AI CPUs, the total addressable market (TAM) for Compute Express Link (CXL) has significant upside potential, which is another basis for HSBC's rating and target price upgrade.

Regarding the direction of AI cluster expansion, Lee believes Marvell will be a "key beneficiary." His logic is that AI clusters are evolving into multi-rack AI factories, a change that is driving the shift from traditional solutions to optical interconnects for high-speed connectivity.

“Marvell is fully seizing this opportunity with its leading position in the 800G and 1.6T digital signal processor (DSP) sector. The DSP is the 'brain' of high-speed optical modules, and Marvell holds a majority market share in this area. Moreover, there is a 1:1 matching relationship between DSPs and optical transceivers, so the company's growth is expected to at least keep pace with the overall industry.”

On the same day, Morgan Stanley and Susquehanna also raised their target prices for Marvell. Morgan Stanley increased its target price from $103 to $172, while Susquehanna raised its from $100 to $230.