WDC - Marvell Broadcom likely to keep benefiting as cloud networking demand stays strong: J.P. Morgan

Marvell Technology ( NASDAQ: MRVL ) and Broadcom ( NASDAQ: AVGO ) are likely to keep benefiting as demand for cloud networking products is likely to stay strong, even if there are concerns about data center spending, investment firm J.P. Morgan said on Tuesday.

A team of analysts, led by Harlan Sur, said that cloud data center capital expenditure forecasts for 2022 are now at 25% growth year-over-year, compared to a previous view of 28% year-over-year growth, but there is still a chance that 2023 can see "mid-teens % [year-over-year growth]" as new data centers are built and the top hyperscalers continue to grow, even if Meta Platforms ( META ) sees a moderation in its growth.

Hyperscalers are seen as the big tech companies and include Meta Platforms ( META ), Microsoft ( MSFT ), Google ( GOOG ) ( GOOGL ) and Amazon ( AMZN ).

The analysts also noted that cloud spending is expected to accelerate in the second-half of the year, up 22% in the second-half, despite delays caused by supply and headcount constraints as well as not being able to get Intel's ( INTC ) Sapphire Rapids server processors.

However, the continued buildout of 200G/400G networking equipment is likely to drive "strong near/intermediate order/shipment trends" for both Broadcom ( AVGO ) -- which sells switching, routing and ethernet chips -- and Marvell ( MRVL ) -- which sells optical connectivity and datacenter interconnect chips.

J.P. Morgan estimated that cloud datacenter is roughly 25% of all semiconductor solution sales for Broadcom ( AVGO ) while it could be as much as 30% for Marvell ( MRVL ).

The analysts noted that Broadcom ( AVGO ) "continues to see strong demand" for its Tomahawk 3/4 and Jericho 2/2c switching/routing products.

Conversely, Marvell ( MRVL ) is seeing strong demand for its 7nm Polaris and Porrima PAM4 200G/400G DSP chips for optical modules, as well as its Vega and Alaska PHY chipsets for 200G/400G switching line-cards.

J.P. Morgan also noted that Intel ( INTC ), Nvidia ( NVDA ), Micron ( MU ), Advanced Micro Devices ( AMD ) and Western Digital ( WDC ) are seen as "other major beneficiaries" of a strong cloud datacenter spending environment this year and next.

On Monday, investment firm UBS reiterated that Marvell Technology ( MRVL ) and Broadcom ( AVGO ) were two of the firm's favorite semiconductor stocks, despite concerns over weakening consumer demand and confidence and rising inventories .

For further details see: