Nvidia vs. Salesforce vs. Marvell Technology: Which Is the Best Stock to Buy?
On the June 1 episode of The Morning Filter podcast, Morningstar Chief US Market Strategist Dave Sekera unpacked recent earnings results from Nvidia NVDA, Salesforce CRM, and Marvell Technology MRVL and discussed how attractive each stock looks today from a valuation perspective. Although all three stocks look undervalued, Salesforce is trading at the biggest discount to Morningstar’s fair value estimate and is the best stock to buy based strictly on valuation. Here’s an excerpt from the episode.
Susan Dziubinski: Well, moving on to some new research, Morningstar edged up its fair value estimate on Nvidia to $280 per share after earnings. Let’s spend a few minutes on Nvidia. First of all, Dave, what stood out to you here?
David Sekera: Honestly, what stood out the most for me on this one is how little the stock price actually ended up moving after the earnings announcement, how little it moved during the conference call, and really the performance that it’s been ever since. That stock was essentially “unched,” unchanged, but the options market was pricing in a plus or minus well over 5% move. For me, I think it’s interesting that the options market was pricing in a pretty substantial move one way or the other, but yet, where the stock was actually trading was kind of meh.
Dziubinski: How were the results, Dave? Were they kind of meh, too? What drove the fair value increase then?
Sekera: No, results were actually extremely strong. I mean, fundamentally, our analyst team noted that there’s just no slowdown whatsoever in the demand for their AI products. In fact, that demand is still accelerating. The company’s doing everything that it can to try and expand its supply just to meet the amount of insatiable demand out there for its chips. The revenue on a year-over-year basis was up 85%. We’re forecasting this quarter that we’re in right now to be up 95% on a year-over-year basis, and it’s not just their AI chips. I think really one of the most important takeaways from what I read in our note, the company’s revenue base is expanding from beyond just AI into their networking business. Their networking business tripled year over year. And one of the big reasons why we think that’s important is networking, we think, is one of the core components of the company’s economic moat.
Specifically, our analyst team writes that interconnectivity between GPU racks drives superior AI performance. Again, I think that’s one of those things where it really helps not only their economic moat, but it’s also nice seeing them diversify their revenue base away from just their AI products. Looking forward, we’re looking for a rollout of their Vera chip in the beginning of the third quarter. That should then ramp up into 2027 and thereafter. Vera is Nvidia’s first custom data center CPU being built specifically for agentic AI. I think that was part of the reason that we increased our fair value to $280, but I think we also just have even more and more confidence in the short-term and the medium-term company forecasts, and overall, still no change to our long-term forecast. It was really that short-term and medium-term increase in the estimates that led us to that fair value increase.
Dziubinski: Let’s do a real quick jargon check here, Dave. What’s the difference between a GPU and a CPU? You mentioned both of them.
Sekera: Yeah. Again, I’m not a tech analyst, so the way that it was explained to me was that they call the GPU the brain power. That’s the part that’s actually doing all of the math behind the scenes. That’s what’s doing the actual AI model inference. Whereas the CPU, they call that the control system. That’s what’s doing all the planning and all the coordination of the ongoing software. It’s really two different parts, but of course, highly interconnected.
Dziubinski: You’re kind of like the GPU of our show, and I’m the CPU of our show.
Sekera: Well, I certainly wouldn’t go that far.
Dziubinski: There we go! That’s it. OK. Last question on Nvidia, and I’ll let you be on that. How’s the stock look today from a valuation perspective? Attractive?
Sekera: It looks very attractive. 25% discount to our long-term intrinsic valuation, enough to put it in that 4-star territory. Again, it’s one of the companies that’s at the forefront of AI technology. Personally, I’d be much more comfortable investing in those companies at the forefront of AI technology, who are staying at the forefront, investing more than enough to keep themselves ahead of everybody else, as opposed to a lot of these hardware companies. Again, shortages in hardware make these companies look like phenomenal growers here for now. Just very concerned that once supply is able to keep up or even catch up to that demand, you’ll see big drops in a lot of those types of stocks.
Dziubinski: Morningstar held its fair value estimate on Salesforce at $280 per share after earnings. How’d things look?
Sekera: Looks just fine to us. I think this is just another one of those indicators that tells us that the death of the software industry is greatly exaggerated at this point. They’re still using artificial intelligence to improve the economic value of their own products. We’re seeing AI showing very good momentum and revenue for those products, like Agentforce and Delta 360°, that they’re building AI into. Those two products; the annual recurring revenue is up over 200% this past quarter. Again, I think they’re using AI to make their products even better, which is going to keep them from getting displaced by AI over time. As far as taking a look at what our forecasts are, our five-year compound annual growth rate for revenue, pretty strong at 8.7%. Little margin expansion gets you to an earnings-growth rate of 13%, trades under 13 times fiscal 2027 earnings estimates.
In fact, going out to 2028, trades at about 12 times. These are really growth stocks or growth-type stocks trading at what I would consider to be pretty much value multiples.
Dziubinski: Now, we have another former pick of yours. Marvell Technology reported last week, and Morningstar increased its fair value estimate on the stock to $235. What drove that pretty big fair value boost?
Sekera: Really, it’s just a combination of the strong results and the increased guidance. Management is now looking for revenue of $16.5 billion in fiscal year 2028, which is calendar 2027. And that’s up just up from where they guide … I’m sorry. You know what? My coffee maker wasn’t working this morning. And so, when I got up, I had to make a cup of coffee. I’m a little caffeine-deprived this morning, so I apologize for where I’m tripping over myself here. But yeah, I mean, the revenue guidance is up 10% from where they guided to just three months ago. Again, I think management is still trying to keep up with what they’re seeing going on in the market, and they’re going to have the closest view as far as what those growth assumptions should be. I think it’s amazing just seeing how much this AI buildout boom here in the short term is still just running at crazy growth numbers.
Overall, it was enough to lift our revenue growth assumptions for the next three years. When I just take a look at the individual products and look at some of the business lines here, Marvell expects their custom compute revenue to double again in 2029 after doubling in 2028, both of that being above our prior model. Again, once we updated that model, that was really what drove the fair value increase.
Dziubinski: Marvell’s stock has been a really good pick. It’s up more than 200% during the past 12 months. Dave, do you still like it? Do you think it still has more room to run based on its current valuation?
Sekera: It’s a tough call. As you noted, I mean, we’ve long been constructive on this name. It’s been a pick. Our analyst really stuck with his guns on this one, even when the market hated it a year, a year and a half ago. 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. Personally, at this point, I kind of prefer to have a little bit larger margin of safety. At this point, it’s not a sell, but it also may not necessarily be the right time to be buying more of the stock at this point. I think this is probably a good one that, if you’re not involved, put it on your watchlist. If you are involved, let this one run further to the upside.
It’s got more upside potential, but if you saw a big pullback, that’s probably the point in time I’d be looking to buy this one.
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