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Shares of Marvell Technology (NASDAQ:MRVL), a semiconductor company, plunged last month as investors fled AI stocks on fears that tech companies are overspending on infrastructure. Shares declined further at the very end of the month after Bloomberg reported that Marvell would buy optical component maker Lumentum.
Marvell stock finished the month down 25.6%, according to data provided by S&P Global Market Intelligence. Here's what investors need to know about Marvell's unimpressive share price performance.
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Marvell stock started the month strong after the company's management announced at its investor day that fiscal 2027 revenue would increase by 45% to $12 billion and 2028 sales would rise another 50% to $20 billion.
What's more, Marvell's leadership said revenue in 2031 would be $80 billion at the midpoint of guidance, nearly 10 times the company's fiscal 2026 sales.
But Marvell shareholders quickly forgot all of that good news as AI stocks declined during the month. Investors have become increasingly skeptical that the hundreds of billions of dollars technology companies are spending on AI data center infrastructure will be worth it.
Bank of America estimates that AI companies could double their spending by 2028, reaching $2.1 trillion. That's a hefty price tag, and investor fears are colliding with the fact that inflation is on the rise, causing many to worry that interest rate hikes could slow the economy and make borrowing even more expensive.
Finally, at the end of October, Bloomberg reported that Marvell was in advanced talks to purchase component maker Lumentum. Marvell will pay for the acquisition in an all-stock deal and values Lumentum at $115 billion. Investors were unhappy with the news because the purchase could significantly dilute existing shareholder value.
Marvell stock started November with a rapid decline, as investors continued to process the news of the Lumentum acquisition and remained concerned about AI spending in general. But Marvell's shares began rising again today as some tech investors rushed back into artificial intelligence stocks, believing that the sell-off over the past month is overdone.
All of which means that Marvell stock could remain volatile over the short term as shareholders try to determine if its recent acquisition -- which is expected to be completed in the first half of 2028 -- is the right move and if the broader AI trade will remain shaky.
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Bank of America is an advertising partner of Motley Fool Money. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum and Marvell Technology. The Motley Fool has a disclosure policy.
Why Marvell Technology Stock Fell Hard in October was originally published by The Motley Fool
