Why AI Chip Stocks Like Broadcom, Marvell, and Arm Holdings Are Rallying Again Today

Why AI Chip Stocks Broadcom, Marvell, and Arm Holdings Rallied Again Today

In a boost to the artificial intelligence (AI) sector, shares of AI chipmakers like Broadcom (NASDAQ: AVGO), Marvell Technology (NASDAQ: MRVL), and Arm Holdings (NASDAQ: ARM) rallied on Monday. The stocks saw significant gains, with Broadcom up 1.2%, Marvell up 1.7%, and Arm up 4.9% as of 1:26 p.m. ET.

This surge in AI-related chip stocks follows a data point that indicates strong demand for the sector. Foxconn’s blowout monthly revenue released on Monday morning is a significant indicator of this trend. Foxconn, one of the world’s largest electronics assemblers, reported massive year-over-year growth of 42.3% in December, its highest figure of any month last year.

This growth was primarily due to high demand for AI servers, which bodes well for the near-term outlook of the AI sector. The news is particularly significant because Foxconn’s business includes AI servers, electric vehicles, and other areas that are closely related to AI technology.

**Foxconn’s December surge may reflect the availability of Nvidia (NASDAQ: NVDA)‘s new Blackwell chip. The rollout of this hardware had been delayed, but production was expected to ramp up in late Q4. Since Nvidia is a key player in the AI sector and its chips are used extensively in AI servers, the increased production of its Blackwell systems would benefit Arm Holdings.

Arm’s strong gains on Monday are not surprising, given its volatility as an AI stock. However, the company’s architecture licensing to other cloud giants for their data center CPUs makes it a key player in the AI sector. The duopoly that Broadcom and Marvell hold as makers of custom accelerator parts also contributes to the surge in AI chip stocks.

Why Foxconn’s news is a positive indicator

Foxconn’s December revenue figures are a significant indicator of strong demand for AI servers, which bodes well for the near-term outlook of the AI sector. The company’s growth was primarily due to high demand for AI servers, which suggests that the trend will continue.

This boost in AI chip stocks is not surprising, given the recent data points indicating strong demand for the sector. Microsoft (NASDAQ: MSFT) published a blog post on Friday stating that it would spend upwards of $80 billion on AI data centers this fiscal year. This investment further reinforces the idea that AI chip demand will remain robust despite the hypergrowth of the past two years.

AI infrastructure buildout and valuations

2025 is expected to be an interesting year for the AI winners of 2023 and 2024, such as Broadcom, Marvell, and Arm Holdings. While there is optimism reflected in their valuations, these stocks are trading at quite full levels.

Broadcom’s valuation stands at 37 times this year’s earnings estimates, while Marvell is valued at 44 times. Arm Holdings’ valuation is even higher at 71 times its earnings estimates. These high valuations make the stocks a tad risky in the near term.

However, it is hard to see anything but positive news for these three companies over the medium term as long as the cloud giants continue racing to achieve better and better AI.

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Conclusion

The AI sector is experiencing a surge in demand, with strong data points indicating that this trend will continue. Foxconn’s blowout monthly revenue figures and Microsoft’s investment in AI data centers reinforce this idea.

While high valuations make these stocks a tad risky in the near term, it is hard to see anything but positive news for Broadcom, Marvell, and Arm Holdings over the medium term.