The Small AI-Chip Maker That’s Now More Valuable Than Intel
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Welcome to Tech News Briefing. It's Tuesday, December 10th. I'm Belle Lynn for The Wall Street Journal. Robinhood, the online brokerage, got its start by making it easy to trade stocks on mobile devices. We'll find out why the company now believes it needs to go back to the desktop computer.

Then, a small chipmaker named Marvell may not be a household name yet, but its latest gains have put the company's market cap ahead of the chip giant Intel. Our Heard on the Street columnist Dan Gallagher tells us what's behind Marvell's stock and how the company can stay on top. But first, Robinhood is heading into the era of desktop computers?

The trading platform, best known for its mobile app, seems to be heading back in time as part of its growth strategy. WSJ's Danny Lewis spoke with Telus Demos, a writer for our Heard on the Street column and co-host of WSJ's Take on the Week podcast. Here's their conversation. Telus, why does Robinhood want to build up a desktop user base? Well, when you think of Robinhood, of course, you think of how it really became prominent, and that was making it really easy to trade online.

particularly on your mobile phone. Robinhood's obviously been through a lot the last few years. It's had its ups and downs through the 2021 meme stock craze to the sort of down market of 2022. And now things have come roaring back for a lot of traders. And so what Robinhood is saying is that one thing it really wants to do is lock down what it calls active traders. That is people who are retail traders, but are very serious about it. These aren't just people who are like, oh, I'm going to

buy a little stock today. They're like, I'm looking at charts. I'm looking at technical ideas. I'm looking at research. This is what I do semi-professionally. And so that clientele, Robinhood says, a lot of what they do takes place on a desktop. And so Robinhood is going about addressing that. They've launched a new platform called Legend.com.

And that is meant to compete with the best of the kind of day trading semi-pro tools that are out there. And so they are one of the biggest names in investing platforms on smartphones. Why not just keep leaning into that technology? So what's great about that technology is certainly that it does make it easier for just about anyone to trade. Maybe too easy, a lot of critics would say. And

And so what's the lure of that is like, okay, you get somebody in to do a little bit of trading. You might not make a ton of money from that person's trading. They're not trading that actively. Maybe they're not putting a ton of money onto the platform. But that is a way to get them in the door to then serve them up other financial products. And that's traditionally how a lot of other platforms and how banks work. And by the way, what Robinhood's thesis is is

is that they have this big idea that like people don't trust institutions. People want to take control of their own things like crypto is the future. I don't want to be involved with a bank or anyone else. So I want to take control. So it's a bet too on what the future investor looks like. What does this term mean for Robinhood's future? Although Robinhood has evolved a lot,

since the 2021 meme stock craze that they were already on the map, but that like really put them on the map in the public consciousness.

After that, certainly I and I feel like a lot of other people that I was reading and talking to figured that they would move in another direction, right? You would see that like trading is this volatile business line. There are times when everybody's trading like crazy and there are times when everyone's scared and they run away from the market. And so that's too volatile to build a business out of. You need to have reliable revenue. And that's what call it banking revenue means. Like, oh, I have an account with you where I keep my money.

You make money from that every day. Oh, I put my retirement assets with you and you earn a little percentage of my money, right? That's a reliable revenue source. And so everybody thought that that's where Robinhood might go. And they want to do those things too. But the fact that they really want to have a big focus on the active trader is just a little bit of a different direction than that. And they're arguing that they can do that and still win in the broader market.

Telus Demos is a writer for our Heard on the Street column, and he's the co-host of WSJ's Take on the Week podcast, which you can catch every Sunday. Check out the latest episode now, wherever you get your podcasts. Telus, thanks for joining us. Thanks for having me. Coming up, it's time to meet the small AI chipmaker that's playing a key role in helping tech giants like Google and Amazon build their own chips. That's after the break.

You want a straightforward path to your goals, but at Merrill, we know things may get in the way.

Or if new opportunities can put you at a crossroads, with the bull at your back, you get a personalized plan and a clear path forward. Go to ml.com slash bullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch, Pierce, Fenner & Smith Incorporated. Registered broker-dealer. Registered investment advisor. Member SIPC. A wholly owned subsidiary of Bank of America Corp.

Things are looking bright for Marvell, an AI chipmaker whose market capitalization briefly rose above $100 billion this past week. So what's driving Marvell's revenue? It's partnerships with tech giants including Amazon and Google, which need its chips and hardware for their data centers and AI. For more on this under-the-radar chipmaker, we're joined by our Heard on the Street columnist, Dan Gallagher.

Dan, a lot of us haven't heard of Marvell before. Tell us, what does it do? They are a chip company, a chip designer. For a long time, they specialized in this wide range of chips that does everything from TV set-top boxes. They do chips that are used in autos, and they do chips in data centers. But they've also grown this business of helping other big tech companies customize their own chips. Because we've heard a lot of stories about how companies like Google and Amazon and Microsoft designed

design a lot of their own chips that are used in their data centers because they can design those things for specific tasks to run much more efficiently than the stuff they buy from companies like NVIDIA or Intel or AMD. They still spend a lot on chips from those companies, especially from NVIDIA. But having these customized processors really helps them, and Marvell plays a really key role in that process.

So let's step back a little bit. Why has Marvell been in the headlines recently? Well, last week was a really big one because Amazon was having their annual user conference they called Reinvent. And as a part of that, they announced this new family of chips that they're working on and Marvell's name came up in that.

It's not a deal for just one chip Amazon's doing. It's a deal that covers at least a few versions of a family of chips designed for AI type of tasks. So it was clear that Marvell was growing their Amazon business. Then Marvell had their own earnings report, which showed this really just gangbusters growth in their data center business. And what was really important for Marvell is that like a lot of chip companies that have AI exposure, they have all these other legacy businesses that aren't growing well or even shrinking.

But they finally reached this tipping point where that data center business is now big enough that it's actually propelling overall growth for the company, even as these other areas have been a little bit weaker.

The same week, we saw that Intel essentially kind of forced out its CEO, Pat Gelsinger, and there was a few media reports from different outlets that named Matt Murphy, Marvell's CEO, as somebody that Intel was looking at for a potential candidate. The timing was obviously interesting because it was going right into Marvell's earnings, and he essentially said, I'm not going anywhere. I'm really happy here. When they're working this closely with big companies like this, and Marvell's not a huge company in its own right,

The CEO plays a super important role in that. And I think he probably felt like it wasn't a good time for there to be doubt about who was going to be running Marvell. Yeah, absolutely. So let's talk a little bit about Intel. To the extent that you can sort of compare and contrast these two companies and their recent trajectories, tell us a little bit about how they're alike and different. Well, I mean, Intel now still makes about 10 times as much revenue.

Marvell, though, its market capitalization is actually past that of Intel because Intel, as we reported, just is having a lot of struggles. They're trying to make this business to, like, become a factory for others to make chips. That's losing a ton of money right now. And the chips that they design have been losing share in the market. And some of the segments that they sell into that they still have a strong share, like PCs, that's just not a growing segment.

Yeah, it's fair to say that this is not the last we'll be hearing of Mar-Vell and maybe it'll become more of a household name. We'll see, you know, and maybe there'll be less confusion with the comic book company.

That's right. There's an extra L there. Okay, last question for you, Dan. What has Marvell's CEO said about potential risks to its share price? Of course, no company is bulletproof and it's sort of potential vulnerability to any downturns maybe in AI spending. Well, this is a very cyclical business. And right now, AI demand has kind of kept sales for companies like NVIDIA. They haven't seen any hiccups yet since that kind of started 18 months ago. But

especially when big tech companies buy chips from data centers, they buy a lot of components, and then they sometimes slow down spending to kind of digest data.

those components and get them installed and so forth. And so we're probably going to see patterns like that emerge. And of course, I think the risk for all these companies that are getting a lot of money right now for AI components, if AI demand doesn't eventually materialize with the end customer, the business customers, the consumers, that could threaten that kind of spending that's elevated the sales for these chip companies so much lately. That was Dan Gallagher, a tech columnist for WSJ's Heard on the Street column.

And that's it for Tech News Briefing. Today's show was produced by Pierre Bien-Aimé and Julie Chang with supervising producer Catherine Milsop. Logging off, I'm Belle Lynn for The Wall Street Journal. We'll sign back in this afternoon with TNB Tech Minute. Thanks for listening. You want a straightforward path to your goals. But at Merrill, we know things may get in the way.

Or if new opportunities can put you at a crossroads, with the bull at your back, you get a personalized plan and a clear path forward. Go to ml.com slash bullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch Pierce Fenner & Smith Incorporated. Registered broker-dealer. Registered investment advisor. Member SIPC. A wholly owned subsidiary of Bank of America Corp.