Is Marvell (MRVL) stock a Buy after 10% overnight crash?

Investors reacted violently to the news that Marvell (NASDAQ: MRVL) is in the final stages of acquiring Lumentum (NASDAQ: LITE), sending the stock 9.97% lower to $226.55 in the after-hours session on Wednesday, October 28.

The bearish reactions appear, by press time early on Thursday, to be driven primarily by valuation concerns. 

Indeed, at the latest close, Marvell’s market capitalization stood at $226.15 billion, and Lumentum’s at $82.78 billion, meaning the former would be purchasing a company 36.60% its size – a fact that naturally leads to various financing concerns.

For its part, LITE stock made the opposite move, and Lumentum shares rose 5.54% in the Wednesday after-hours from $913.95 at the closing bell to $964.45.

Despite this, recent developments and the reported agreement itself still arguably paint a generally bullish picture for MRVL shares.

Why the Lumentum acquisition is bullish for Marvell stock

To begin with, Lumentum is a company that specializes in manufacturing optical and photonic products used in communications and data center projects, meaning its acquisition could deepen Marvell’s existing involvement with the artificial intelligence (AI) boom.

Indeed, the semiconductor company has already been a major beneficiary of the vast infrastructure expenditure, seeing its equity rise 181.52% year-to-date (YTD), and the purchase would turn it into an even more comprehensive supplier.

The move represents a continuation of the previous policy that saw Marvell buy a different photonics company – Celestial AI – late in 2025.

Meanwhile, along with the reportedly planned expansion of its operations, the company anticipates its existing business will continue growing rapidly.

Marvell forecasts strong revenue and data center growth for 2028

At the October 6 investor day, the firm hiked its revenue forecast to roughly $20 billion for fiscal year 2028 (FY2028). Notably, FY2028 is the 12-month period that ends on January 30, 2028.

The announcement represents not only a $2 billion increase from the $18 billion predicted in August, but also a 66.67% rise from the approximately $12 billion Marvell anticipates in the ongoing fiscal year.

A particularly momentous part of the forecast increase came from the data center division, as Marvell now anticipates 60% growth for the segment in FY2027 – previously, a 50% rise was expected – and it already recorded a 46% year-over-year (YoY) increase in the fiscal second quarter (Q2).

Similarly, the long-term target also moved up from the $15 billion projected in 2024 for 2029 to the $18 billion predicted in October 2026.

Overall, the business developments, planned acquisition – should it be executed without damage to the company’s overall health – and the extended session drop all position Marvell stock as a strong buy.

The AI data center bear case for Marvell stock

Elsewhere, investors should retain at least a somewhat cautious approach to MRVL shares. The company’s business remains relatively concentrated in relatively few customers and, despite its successes, the AI ‘boom’ appears more unstable than ever.

Data centers in particular appear at risk of a significant slowdown given that, as seen in the case of Amazon’s (NASDAQ: AMZN) inability to install all the chips it purchased, power remains a major bottleneck.

Additionally, the actual supply and demand also appear murky, with Ed Zitron – a prominent critic of big tech – estimating that companies like Microsoft (NASDAQ: MSFT) deliberately failed to properly distinguish between AI data centers and regular facilities when reporting construction, while also failing to install more than 50% of the hardware they purchased.

Combined, these allegations indicate that the assessments and projections regarding artificial intelligence infrastructure might be significantly less reliable than one might expect.

Could Nvidia burst the AI ‘bubble’ and collapse Marvell stock?

Likewise, the reported levels of utilization of purchased hardware could have an adverse effect on the world’s largest company by market capitalization, Nvidia (NASDAQ: NVDA). 

Specifically, even the extension to the assumed useful life of advanced GPUs made ahead of the AI ‘boom’ puts the figure at 6 years. 

While it is possible to use these chips beyond the 72-month mark, the question of why companies like Microsoft and Amazon would buy more hardware if they are unable to use what they already have in warehouses remains relevant.

Should Nvidia’s sales slow, the position of the company in the overall AI industry could trigger a contagion even if the other firms remain healthy, causing a veritable stock market bloodbath for Marvell and many others.

Lastly, the vast layoffs – whether triggered by technological adoption or the need to fund the ballooning capital expenditure (CapEx) – paired with inflationary pressures and other long-term issues in the global economy could generate additional, external headwinds for the entire world.

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