Investors are hunting for the next trillion-dollar S&P 500 tech stock behemoth like mega-caps Amazon, Apple or Nvidia. So what about these three?
Are Marvell shares just too pricey?
I’m keeping close tabs on Marvell Technology (NASDAQ: MRVL). It shares are up 250% in the last three months, and 338% over one year. As ever, we need to approach with caution.
Marvell designs high-performance silicon chips and networking hardware to power cloud data centres, AI clusters, and 5G networks. It’s a classic ‘picks and shovels’ critical AI infrastructure play.
Inevitably, it’s a gamble on whether AI transforms the global economy, or is a bubble in the making. Marvell is shockingly expensive, with a price-to-earnings (P/E) ratio of 231. But it’s making money, with Q1 revenue jumping 28% to $2.42bn. It must maintain that pace of growth, to justify its P/E. Any slip will be punished.
Marvell has a market cap of $231bn. So it’s far from a trillion-dollar baby yet. On Wednesday (17 June), the Marvell share price hit an all-time high of almost $330, on hopes of a big order from Amazon. But that’s not in the bag. I’m sorely tempted, but this could be a bumpy ride. That’s true across the sector.
Should I buy Ciena stock?
Networking systems and software developer Ciena (NASDAQ: CIEN) is flying even higher. Its shares are up 463% in the last year. Unsurprisingly, they have an even higher P/E of almost 292. However, the forward P/E is just 82, which suggests that earnings should keep barrelling along. At this valuation, they’d better.
Ciena is another AI infrastructure play, as it helps telecom and cloud providers handle the immense traffic surges generated by AI applications. With demand outpacing supply, it has plenty of pricing power.
Q1 revenue jumped 33% year on year to $1.43bn. And it forecasts full-year revenue will climb 28% to $6.1bn, up from 19% last year.
Again, the risk is that it falls short. If it has to raise further capital to fund its expansion, that could dilute existing holdings. Its shares have been volatile in the past. It’s a smaller player than Marvell, with a market cap of $68bn. I’m tempted.
Is Soundhound just too risky?
Soundhound AI (NASDAQ: SOUN) is a relative minnow with a market cap of just $3bn. And in another contrast, its shares have done badly, actually falling 25% in the last year. Is this an opportunity or a threat?
Soundhound is a voice AI specialist. Think Alexa, but its white label product is designed to be customised by other businesses. It attracted a lot of early-stage AI hype, and revenues have been rising strongly, with Q1 figures showing a 52% rise to $44.2m.
There’s a problem though. As nerves jangle, investors want to see profits too. Soundhound is still posting net losses, and Q1’s was bigger than expected. Another danger is that one of the big players will basically eat its lunch. This is high risk, high reward.
All three are worth considering but only by investors who fully understand the risks. Many companies aspire to be the next Nvidia, but they can’t all get there.
Should you invest £5,000 in Marvell Technology right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Marvell Technology made the list?
Harvey Jones owns shares in Nvidia.
