Behind the video
HOLY AI Merger: Nvidia's AI Stocks Marvell & Lumentum MERGING
Overall Thesis
Kevin supports the prospective Marvell acquisition of Lumentum as a way to build a more vertically integrated AI optical interconnect supplier. He would buy Marvell's dip despite anticipated financing dilution and favors diversified exposure to AI hardware, including Broadcom.
Narratives
Kevin likes Lumentum's optical hardware exposure and sees potential stock upside if its rapid growth persists. He regrets not buying before the acquisition-related jump but acknowledges valuation concerns and cheaper alternatives.
Key Arguments
- Laser manufacturing is an important part of the optical interconnect stack.
- Reported revenue and gross profit growth indicate strong pricing power.
- Operating expenses have grown more slowly than revenue and gross profit.
- He reiterates earlier analysis linking sustained growth to upside during an anticipated hardware rally.
Risks acknowledged
- He previously considered the shares somewhat expensive.
- Broadcom and Marvell are described as cheaper options.
- He had not become sufficiently convinced to buy.
- Upside depends on maintaining growth.
Predictions (1)
MRVLMarvell TechnologyKevin would buy Marvell's acquisition-related dip because he wants exposure to the combined optical technology and manufacturing stack. He anticipates near-term stock weakness from debt and equity financing while viewing the strategic combination enthusiastically.
Key Arguments
- Lumentum would add lasers and manufacturing capabilities to Marvell's ASIC, digital signal processing and optical connectivity portfolio.
- NVLink Fusion integration provides access to NVIDIA's ecosystem.
- Custom silicon relationships with major hyperscalers support demand.
- Revenue growth exceeding cost growth suggests improving pricing power.
- Growing bandwidth requirements may increase optical interconnect adoption.
Risks acknowledged
- Marvell lacks sufficient cash to fund the proposed acquisition outright.
- Debt and share issuance would pressure shareholders.
- The strategy entails greater execution risk than Broadcom's more conservative approach.
- Copper retains a cost advantage.
- Marvell's valuation is higher than Broadcom's.
AVGOBroadcomKevin recommends owning both Broadcom and Marvell to cover competing connectivity strategies. He views Broadcom as a leading custom silicon supplier with a conservative approach and a cheaper valuation than Marvell.
Key Arguments
- Broadcom is described as the ASIC market leader.
- Its copper connectivity strength benefits from copper's lower cost.
- It also has optical ambitions.
- Its valuation provides a comparatively cheaper alternative to Marvell and Lumentum.
Risks acknowledged
- Marvell is pursuing a more ambitious optical integration strategy.
- The future balance between copper and optics is uncertain.
Predictions (1)
Kevin is excited about Corning's fiber optics opportunity as AI bandwidth needs grow. He considers its valuation fair but emphasizes that only part of the company directly benefits from booming fiber demand.
Key Arguments
- Corning supplies glass and fiber used in optical cabling.
- Copper distance limitations create an opportunity for fiber connections.
- He highlights supply agreements and pricing power.
Risks acknowledged
- Legacy operations make Corning a less concentrated fiber optics investment.
- He does not own the shares.
- The valuation covers the entire company despite uneven growth across businesses.
NVDANVIDIAKevin interprets NVIDIA's investments in Marvell and Lumentum as hedges that preserve its ecosystem across connectivity technologies. Copper supports current margins, while optical partnerships and NVLink Fusion could keep custom silicon integrated with NVIDIA infrastructure.
Key Arguments
- Investing in optical suppliers provides exposure if optics gains adoption.
- NVLink Fusion can bring custom chips into NVIDIA racks.
- NVIDIA offers a broad integrated infrastructure stack.
Risks acknowledged
- Custom ASIC suppliers represent competitive pressure.
- Optical adoption remains uncertain and copper is cheaper.
DELLDell TechnologiesKevin describes Dell as having become substantially cheaper. He uses its historical performance to illustrate how a growing business segment can matter even within a diversified company, without making a forward stock-direction claim.
Key Arguments
- He considers the valuation more attractive.
- Past performance illustrates the potential importance of a relatively small growth segment.
Hedges & Caveats
- The acquisition is reported as a possibility and has not been confirmed in the transcript.
- Marvell would need debt and share issuance, creating dilution and near-term stock pressure.
- Marvell's ambitious strategy increases execution risk.
- Copper remains cheaper and preferred where technically feasible.
- Lumentum's upside depends on sustaining growth; Broadcom and Marvell are described as cheaper alternatives.
- Corning's legacy operations dilute its exposure to booming fiber optics demand.
- He cannot identify which hardware company will perform best and recommends diversification.
- The broader hardware rally thesis includes an Iran-deal catalyst and an explicit admission that he could be wrong.
- He discloses exposure to Marvell and Broadcom and describes his comments as not personalized financial advice.