Strong Interest Extends Beyond Hyperscalers, and Data Center Semiconductor Content Continues to Surge in Support of AI
During its investor day, Marvell highlighted a significant trend in the semiconductor industry: the move toward custom solutions is both accelerating and expanding. What was once a speculative venture just five years ago has now become one of the fastest-growing mainstream segments. This shift is driven by the rising demand for specialized hardware tailored to advanced technologies like AI, machine learning, and high-performance computing. In fact, the above paragraph was written using AI that touched on Marvell’s custom and merchant silicon. Now, back to the human writing and key takeaways from Marvell’s Investor presentation.
Custom Silicon TAM Expands
Marvell has significantly increased the total addressable market (TAM) for XPUs and silicon adjacent to the XPUs since its previous investor day. The company expanded the number of customers it works with and the number of significant silicon opportunities that cloud customers now require. Also, highlighted were the speed of innovation and the pace of its 16/14 Angstrom products. We have barely started with 5nm, and customers are already thinking about 3-4 process geometries beyond that.
Custom Silicon is More than XPUs
Marvell highlighted both custom XPU and custom XPU-attached silicon. While some of the XPU-attached silicon may have a lower ASP than the XPU, we expect that the volumes of these offerings will be significant. We have been projecting this type of custom silicon for quite some time in our forecasts and were excited to see Marvell highlight what is occurring beyond the XPUs. Given the monetary value of AI factories, we expect many parts of the memory, storage, and network stack to have custom options in order to accelerate the complete rack solution.
Our View of Custom Silicon
Custom Silicon plays a key role in moving the industry forward and optimizing in ways that were not attainable just a few years ago. While there has been considerable excitement in the XPU market due to its size and cost, a significant market opportunity (TAM) adjacent to the XPU is just starting to emerge. When we examine our forecasts for Custom Silicon, not only is the total market larger than we projected a few years ago, but the number of customers tapping into the market is also larger. We view this as beneficial for the industry, as it reinforces the trend of a larger set of customers spending significantly to deploy AI.
A larger and broader spend with customers creates a more robust market. We believe that the market for custom silicon will continue to grow, especially as customers deploy initial products, which will provide them with additional areas to customize. Silicon photonics and CPO will likely be an enabler for the bandwidth necessary to push the boundaries of AI and move the industry from the current agentic AI wave to the robotics and autonomous transportation wave, which we expect to arrive before the end of the decade.
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