Buying Into Big Tech With This Chip Stock, Data Center Play
All of the company's components are seeing a surge in demand connected to the huge global AI data center buildout. Here's my trade strategy.
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Today, we venture into the technology sector for a rare, covered call trade idea around a big tech stock. The name in question is Marvell Technology (MRVL) , which currently trades just over $86 a share and sports a market capitalization near $75 billion.
One of the attractive traits around Marvell is that the options around the equity are highly liquid and quite lucrative. I can target a $80 call strike for the trade and still get a desirable return or a much lower entry point on the equity if it moves down. I also buy some nice downside risk mitigation in what has been a highly volatile stock over the past 12 months.
Marvell is a large fabless semiconductor concern focused on the development of products for four major end users, including the massively growing data center market. While Marvell is based in the Golden State, approximately 75% of its sales go to Asia, including Taiwan and China. This obviously has made the stock vulnerable in 2025 as tariff policies are evolving by the week it seems.
Marvell’s product portfolio includes application specific integrated circuits (ASICs), interconnects, ethernet solutions, fiber channel adapters, processors, and storage controllers. All of these components are seeing a surge in demand connected to the huge global AI data center buildout in recent quarters. Data center demand now accounts for just over 70% of Marvell’s overall sales mix right now.
Outside of data center demand, the early part of 2025 was a rough one for the company as revenues from enterprise networking, carrier infrastructure, consumer and automotive were all down sharply. The steep declines in enterprise networking and carrier infrastructure were blamed on inventory corrections, but both businesses are doing much better recently. Marvell also sold off its automotive business over the summer for $2.5 billion. To emphasize the growing importance of data center customers, Marvell recently combined its five business divisions into three (Data Center, Communications, Other).
The stock has been buffeted by tariff concerns throughout the year, and some worries Marvell might lose some of its business supplying Amazon (AMZN) to a Taiwanese chip company, a concern Marvell’s CEO recently batted down. In its last reported quarter, data center revenues rose nearly 70% on a year-over-year basis. This year’s top line is expected to grow 40% on a year-over-year basis.
The company is demonstrating considerable confidence in recently announcing an additional $5 billion to an existing stock buyback authorization. It also should be noted that insiders purchased just over $2 million collectively worth of stock at the end of September.
The company’s free cash flow grew 26% in the first two quarters of this fiscal year as well. The stock is not cheap like many of my recent recommendations such as Novo Nordisk (NVO) . However, the equity is not unreasonably priced given its growth prospects at roughly 25 times next fiscal year’s projected EPS.
Option Strategy
This is how one can initiate a holding in MRVL with a covered call order. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the June $80 call strikes, fashion a covered call order with a net debit in the $67.10 to $67.30 a share range (net stock price - option premium).
This strategy provides downside protection of approximately 22% and upside potential of 19% even if this equity trades down 8% over the option duration.
At the time of publication, Jensen was long AMZN, MRVL and NVO.
