Vanguard S&P 500 ETF: The Role of AI Stocks in Growth

Analysis reveals that AI stocks are significantly boosting returns in the Vanguard S&P 500 ETF. While Marvell Technology demonstrates strong growth, its absence from the S&P 500 could impact investor decisions for short-term holdings.

Date: 28-03-2025

AI Rating: 8

Market Overview: The Vanguard S&P 500 ETF, closely tracking the S&P 500, benefits greatly from the rise of AI stocks, which have been pivotal in driving returns. The performance of this ETF can directly influence investor sentiment and market positions over the next few months.

Company Focus: Marvell Technology
Marvell has established a significant foothold in the AI chip market with a robust range of products like network switches and optical communication chips that are essential for AI functionalities. Their substantial growth trajectory, fueled by partnerships with industry giants such as Amazon and Meta Platforms, positions them as a formidable player in the tech sector. Marvell’s revenue from AI chips exceeded $1.5 billion for fiscal 2025 and is anticipated to exceed $2.5 billion in the current year. This anticipated growth showcases a significant revenue increase, boasting a 78% year-over-year surge in data center revenue.

Earnings Analysis:
Marvell's GAAP profit of $200 million last quarter indicates operational efficiency; however, its challenging history with GAAP profitability, primarily due to high amortization expenses from acquisitions, has kept it out of the S&P 500. Management expects to sustain this GAAP profitability going forward, which, if achieved, may lead to an eventual inclusion in the S&P 500. The adjusted earnings per share forecast indicates a remarkable growth of 135% over the next two years, suggesting that current share prices may be undervalued at 25 times the consensus estimate for adjusted EPS in fiscal 2026.

Conclusion:
Given the strong expectations for AI chip demand, Marvell's prospects present a strategic opportunity. However, its lack of S&P 500 inclusion could deter some index investors looking for stability. Investors should consider the implications of these factors on their short-term holdings. Overall, while Marvell showcases a solid growth narrative, the volatility related to its market segment and absence from a prestigious index might introduce risks that need to be weighed carefully against potential rewards.

Stocks: MRVL AMZN META GOOGL MSFT AVGO