If you have a budget of $5,000, Consider Investing Long-Term in These 2 Tech Stocks.
2025 is shaping up to be an exciting year, especially for tech-focused investors. The Nasdaq Composite had an extraordinary year, reaching numerous all-time highs and finishing up an impressive 29%. As we head into the holiday season, it's an excellent time to evaluate your investment strategy and seek out companies with strong long-term prospects.
Two such companies are Marvell Technology and Amazon, both benefiting significantly from the burgeoning hyperscale data center market and the AI revolution. This article will delve into why these two stocks are worthy of consideration for your investment portfolio.
Marvell Technology
The market for hyperscale data centers (over 100,000 square feet) is experiencing a phenomenal growth spurt, with numerous massive projects being announced regularly. Companies like Meta Platforms, Amazon, and Elon Musk's xAI Colossus are leading this charge, investing billions in their data centers worldwide.
This surge in demand for hyperscale data centers has created a need for extensive infrastructure, such as networking hardware, servers, and storage. Enter Marvell Technology, a $100 billion company by market cap, with a strong focus on supplying this increasing demand.
The company's sales outside of data centers, including consumer and automotive uses, took a hit last year. However, its fortunes have turned around dramatically, with data center sales skyrocketing 98% year over year, reaching $1.1 billion in the last fiscal quarter. Marvell expects another significant increase to over $1.3 billion in data center sales during its fourth quarter of fiscal 2025.
While Marvell isn't yet profitable according to generally accepted accounting principles (GAAP), its non-GAAP (adjusted) results paint a promising picture, indicating a profitable future. The company produced non-GAAP earnings per share (EPS) of $0.43 in its third quarter and expects $0.59 in the fourth quarter. Analysts estimate total EPS of $2.76 in the upcoming fiscal 2026, giving Marvell a forward price-to-earnings ratio of 43.
Although this isn't cheap, tech investors should be willing to accept some volatility and consider utilizing a strategy like dollar-cost averaging to take advantage of temporary dips. Marvell has an extensive runway in this explosive market, and its valuation will likely decrease as it grows over time.
Amazon
Amazon is synonymous with online retail, but its cloud service segment, Amazon Web Services (AWS), is a significant driver of the company's success. AWS accounted for 60% of the total operating profits over the past 12 months, contributing significantly to Amazon's overall growth.
The growing need for AI in various industries has driven AWS growth, as the segment operates much like a utility, with companies paying for the data they use or store. Amazon's focus on AI and hyperscale data centers has made it the industry leader in this field.
The recent rally in Amazon's stock price has moderated its discounted valuation, but it still trades below its five-year averages based on earnings and operating cash flow (CFO). Investors should view this as an opportunity to invest in a long-term winner in the rapidly evolving technology landscape.
Enrichment Insights
- Marvell Technology: Marvell is increasingly focusing on AI-first custom silicon, with its custom silicon business accounting for 73% of Q3 revenues. The company's strategic five-year agreement with Amazon to collaborate on AI-specific ASICs such as Trainium and Inferentia is expected to drive substantial revenue growth.
- Amazon: Amazon is investing heavily in AI-focused data centers, like Meta and Microsoft, and has a sizable capex budget this year. Its leadership in the hyperscale market and commitment to AI are driving substantial revenue growth, with AWS leading the way in contributing to the company's profits.
Conclusion
Marvell Technology and Amazon are poised for long-term success due to their strong involvement in the growing markets for hyperscale data centers and AI. Investors should consider these stocks carefully and look for opportunities to capitalize on their promising future.
- According to Statista, the market for hyperscale data centers is predicted to grow significantly by 2025, and companies like Marvell Technology are well-positioned to benefit from this trend, given their focus on supplying the necessary networking hardware, servers, and storage.
- As tech-focused investors prepare for 2025, they might want to consider investing in stocks that can provide tailwinds from the burgeoning hyperscale data center market. Marvell Technology, with its strong focus on supplying network infrastructure for hyperscale data centers, is one such investment opportunity.
- In line with the expected growth in the hyperscale data center market by 2025, Marvell Technology has predicted a substantial increase in its data center sales, from $1.1 billion to over $1.3 billion during the fourth quarter of fiscal 2025.
- Amazon, another tech giant benefiting from the AI revolution and hyperscale data center market, has a significant discounted valuation, making it an attractive investment opportunity for tech-focused investors seeking exposure to the rapidly evolving technology landscape in 2025.
