Some stocks are hot. Others are scorching. Having more than tripled over the past year and now flirting with a quadruple over that period, semiconductor maker Marvell Technology (MRVL) is certainly in the scorching camp.
It’s obviously benefiting the Direxion Daily MRVL Bull 2X ETF (MRVU), an ETF designed to deliver 200% of the daily performance of the chip stock. MRVU displayed its benefits to short-term traders earlier this week when Marvell surged 32% in a single trading day after Nvidia (NVDA) CEO Jensen Huang overtly complimented the fabless semiconductor company – heady praise to be sure.
See more: It’s Nvidia’s World: How Advisors See the Next Phase of AI
Perhaps take it with a grain of salt because Nvidia is invested in Marvell, but Huang came right out and said that Marvell could become a $1 trillion company. Such a statement implies an opportunity to occasionally capitalize with the leveraged MRVU. To get to a market value of $1 trillion, Marvell would need to more than triple from its June 2 market cap.
Potentially adding to the allure of Marvell for committed investors and supporting the case for occasional deployment of MRVU is the point that, believe it or not, some market observers don’t view the stock as overvalued.
“It is still a 4-star-rated stock that trades at a 13% discount. Technically, as a 4-star-rated stock, we do think that it is attractive compared to its long-term intrinsic valuation on a risk-adjusted basis,” noted Morningstar’s Dave Sekera.
More to Come for MRVU?
Marvell’s positioning in the data center interconnect (DCI) module space indicates that the chipmaker is a leader in addressing a key artificial intelligence (AI) bottleneck. That is music to bulls’ ears, as well as to traders seeking amplified short-term gains with MRVU. Consider what Chairman and CEO Matt Murphy had to say about DCI modules on Marvell’s latest earnings conference call.
“The increase in our revenue outlook continues to be driven by our data center business, which we now expect to grow approximately 50% this fiscal year. Notably, we expect our interconnect business to grow more than 70% [YoY], well above our prior expectation of 50% growth,” he said.
Another potential catalyst for the chip stock and thus MRVU, is the stock’s potential inclusion in the S&P 500, which is expected to rebalance on June 19. Still, traders should be careful with MRVU heading into that event.
“However, there’s no guarantee Marvell will be added immediately. The selection committee at S&P Dow Jones Indices has discretion when determining which eligible companies to add to the index and sometimes chooses not to make changes at the scheduled time,” noted Barron’s.
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