By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panel discusses the shift in AI investing towards infrastructure-heavy companies like MRVL, ALAB, ARM, and the risks associated with high valuations, cyclical hardware risks, and potential disruptions from custom silicon and RISC-V.
Risk: High valuations and potential disruptions from custom silicon and RISC-V adoption
Opportunity: Expansion of ARM's royalty take-rate in the data-center architecture play
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
MRVL and ALAB have surged 187% and 151% YTD as hyperscaler capex floods into custom silicon and PCIe connectivity beyond GPUs.
Cerebras locked a $20B OpenAI inference contract and a $1B working capital loan, making its 36% post-IPO pullback look like an entry point.
ARM's royalty model now spans every major AI CPU, including NVIDIA Vera, Google Axion, and Microsoft Cobalt, with data center royalties more than doubling year over year.
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The AI data center buildout is minting a second tier of winners that most retail investors still haven't priced in. While the crowd fights over GPU tickers, the money is quietly flowing into the plumbing: RF, optical, custom silicon, PCIe retimers, wafer-scale compute. Consider that ArmHoldings(NASDAQ:ARM) alone now sees over $2 billion in customer demand for its AGI CPU across FY27-FY28, with the data center CPU market pegged at more than $100B by 2030. That is one company, one product line. The following five names sit directly on the fuse.
1. MACOM Technology Solutions
Start with the name almost nobody puts on their AI list. MACOM Technology Solutions(NASDAQ:MTSI) builds the RF, microwave, analog and optical semiconductors that increasingly show up in hyperscaler switch cages and pluggable optics. As 800G migrates to 1.6T and copper interconnects hit their reach limits inside AI racks, MACOM's analog and light-wave content per rack goes up, not down. This is the shovel play behind the shovel play.
Fiscal Q2 2026, reported May 7 was the tell. Revenue hit $288.95 million, up 22.5% year over year, adjusted gross margin expanded to 58.5%, and management guided fiscal Q3 to $331M to $339M in revenue with adjusted EPS of $1.31 to $1.37. The Street is catching up: analysts carry a consensus target of $403 with three strong buys and nine buys against zero sells.
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The chart tells the rest. Shares are up 76.32% year to date through July 10, yet the stock trades at a forward multiple of 45x, well below the pure-play AI silicon cohort. The heavyweight comes next, and it has already tripled.
2. Marvell Technology
Marvell Technology (NASDAQ:MRVL) is the custom silicon partner every hyperscaler wants on speed dial. Its portfolio spans 800G and 1.6T scale-out optics, 51.2T Ethernet switches, NPO and CPO optical solutions, and custom XPU designs, which puts Marvell directly inside the AI cluster. The February acquisitions of Celestial AI (photonic fabric) and XConn Technologies bolted on the exact optical interconnect IP that determines who wins the next generation of scale-up fabrics.
Q1 FY2027, reported May 27 put numbers behind the thesis. Revenue reached $2.418 billion, up 27.6% year over year, with the data center segment contributing $1.83 billion, or 76% of revenue, up 27% year over year. Management guided Q2 to $2.70 billion. On the call, CEO Matt Murphy told investors, "We are seeing exceptional AI-related bookings, and as a result, we are significantly raising Marvell's revenue outlook for both fiscal 2027 and fiscal 2028".
The stock is up 163.80% year to date and 221.44% over the past year. Yet with 31 Buy ratings and seven Strong Buy ratings against a consensus target of $252.26, sell-side conviction remains intact. The next name doesn't build chips at all. It taxes them.
3. Arm Holdings
Every custom AI CPU shipping in volume in 2026 runs on Arm Holdings IP. NVIDIA Vera, Google Axion, Microsoft Cobalt: all Arm-based. Arm collects a license upfront, then a royalty on every unit shipped, forever. That is the toll-booth model, and the toll booth is now sitting on the fastest-growing road in tech.
Q4 FY2026, reported May 6 delivered revenue of $1.49 billion, up 20.1% year over year, with licensing revenue of $819 million, up 29% and data center royalty more than doubling year over year. CEO Rene Haas framed the setup bluntly: "As AI becomes more agentic, demand for Arm AGI CPU, Arm's first data center chip, has exceeded expectations, reinforcing Arm as the compute platform for the AI era." Meta is the lead partner.
Shares are up 181.87% year to date. Valuation is stretched at 137x forward earnings, but the analyst pool holds seven Strong Buy ratings and 20 Buy ratings. Retail is here too: Reddit sentiment on r/wallstreetbets rebounded to a bullish 74 by June 27 after a brief regret-post-driven dip. The next stock is the one connecting all of these chips inside the rack.
4. Astera Labs
Astera Labs (NASDAQ:ALAB) makes the retimers, smart cable modules, and fabric switches that keep PCIe 6 and CXL links alive inside AI servers. When rack density climbs and every XPU wants to talk to every other XPU at line rate, Astera's silicon is what makes it possible. In May, the company launched the Scorpio X-Series 320-lane Smart Fabric Switch targeting a $20B merchant scale-up market by 2030. That is not a niche.
Q1 2026 was a statement quarter. Revenue reached $308.36 million, up 93.4% year over year and 14% sequentially, non-GAAP EPS came in at $0.61 versus $0.54 expected, and operating income jumped to $61.8M, up 447.9% year over year. Management guided Q2 to $355 million to $365 million. Astera has beaten consensus in every one of its ten reported quarters, with surprise percentages that show sell-side models can't keep up.
Shares are up 129.99% year to date and 325.65% over the past year, with a 24.82% pop in the last month alone. The last name on this list builds the entire AI system itself.
5. Cerebras Systems
And here it is: the payoff. Cerebras Systems(NASDAQ:CBRS) went public in Q2 2026, raising $6.4 billion, backed into the AWS ecosystem with a partnership pairing Trainium 3 with the Cerebras CS-3, and then locked in a multi-year OpenAI deal for 750MW of inference compute valued at more than $20B. OpenAI also extended Cerebras a $1B working capital loan in January 2026. Wafer-scale has graduated into the AI inference backbone OpenAI chose. Q1 2026 revenue printed at $193.4M, up 94% year over year, with Cloud and Other Services up 178% to $82.8M. The full-year 2026 guide sits at $855M to $865M, roughly 69% growth at the midpoint. CEO Andrew Feldman put it plainly: "Cerebras' wafer-scale technology delivers the fastest AI in the world... This is the Cerebras mission."
The setup is asymmetric. Shares have already pulled back 30.86% since the May 14 IPO peak as retail digested guidance that forecast shrinking margins, with the Reddit sentiment score cratering to 35 on IPO day. Analysts see a target of $291.09, well above the current price. When the largest AI lab in the world writes you a $20 billion contract and a $1 billion loan, gross margin compression in year one is a footnote, not a thesis.
The Bottom Line
The AI datacenter trade has moved past the GPU. It now runs through RF and optical content, custom XPU silicon, licensed CPU cores, PCIe fabrics and wafer-scale inference clusters. Every one of these five names is already accelerating revenue, and four of the five have outperformed the market year to date. The window on the "under the radar" framing is closing quickly as sell-side targets catch up to shipment reality. Keep an eye on the group into the next earnings cycle.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Arm didn't make the cut. Grab the names FREE today.
Four leading AI models discuss this article
"The current multiples on AI infrastructure stocks have decoupled from fundamental revenue growth, creating a dangerous 'priced-for-perfection' environment that leaves retail investors vulnerable to any minor earnings disappointment."
The article correctly identifies the transition from 'GPU-only' to 'infrastructure-heavy' AI investing, but it suffers from extreme valuation blindness. While MRVL and ALAB are essential for high-speed interconnects (PCIe/CXL), trading at 45x-137x forward earnings assumes a flawless execution path that ignores cyclical hardware risks. ARM's royalty model is robust, but the 137x multiple prices in near-perfection, leaving zero margin for error if hyperscalers pivot to internal custom silicon faster than expected. The most dangerous omission is the 'Cerebras' hype; a $20B contract is a massive concentration risk, and wafer-scale compute remains unproven at the scale of NVIDIA's Blackwell ecosystem. Investors are paying for growth that is already priced into the stratosphere.
The 'plumbing' thesis is fundamentally sound because hyperscaler capex is non-discretionary; if they stop buying these interconnects, their massive GPU clusters become useless, expensive paperweights.
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"The 'second tier' has already repriced as first tier; the real question is whether current valuations assume capex growth that doesn't materialize or whether custom silicon defensively outperforms GPU-centric plays in a slowdown."
The article conflates 'under the radar' with 'already up 76-325% YTD.' MRVL, ALAB, ARM are not hidden anymore—they're priced as if the hyperscaler capex cycle is locked in through 2028. The real risk: this assumes sustained 25-30% YoY data center growth and that custom silicon gains don't cannibalize margins industry-wide. MTSI at 45x forward P/E and ARM at 137x forward earnings leave zero room for a capex slowdown, a GPU efficiency breakthrough that reduces interconnect density, or hyperscalers shifting to in-house designs faster than expected. The article also omits that CBRS's $20B OpenAI deal is multi-year revenue recognition—not a 2026 revenue cliff, but also not immediate cash. Margin compression is real, not a footnote.
If hyperscalers hit capex saturation in H2 2026 or shift spend toward power/cooling over silicon, or if NVIDIA's next-gen GPU architecture reduces the need for custom interconnect, these 'plumbing' stocks face a 30-50% reset despite strong current bookings.
"The core risk is cyclical and valuation-driven: durable upside in these names requires an unbroken AI capex cycle and sustained margin strength, which may not materialize."
Today’s piece pushes a ‘second tier’ of AI hardware suppliers as the real data-center win beyond GPUs, naming MACOM, Marvell, Arm, Astera, and Cerebras. The premise hinges on hyperscalers’ capex extending into RF, optics, PCIe fabrics, and licensed CPUs with durable revenue from ongoing AI deployments. Yet the risk is large: the cycle is highly cyclical and capital-intensive, and a slowdown in AI demand or macro conditions could compress margins and valuations quickly. ARM’s 137x forward multiple, and other names’ stretched carries, suggest limited downside protection if growth slows. Cerebras’ OpenAI contract may be exceptional, not replicable. Execution and customer concentration risks loom in a crowded, competitive space.
The OpenAI deal could be a best-in-class anchor rather than a scalable, repeatable revenue stream; if AI capex slows or moderates, these stocks could re-rate sharply as margins compress and multiple expansion reverses. In short, the alleged secular tailwinds may be outweighed by cyclicality and valuation risk.
"ARM's valuation reflects its transition to a dominant data-center architecture provider, not just a mobile chip designer."
Claude and Gemini are fixated on the 137x P/E for ARM, but they miss the structural shift: ARM is no longer a mobile processor play, it is a data-center architecture play. If hyperscalers like AWS and Google continue their custom silicon push (Graviton/Axion), ARM's royalty take-rate actually expands. The valuation isn't just 'perfection' pricing; it is a bet on ARM becoming the x86 of the AI era. The real risk is not the multiple—it is the potential for RISC-V to eventually commoditize ARM's core IP.
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"ARM's royalty moat holds on custom CPUs but fractures if RISC-V captures emerging accelerator categories before ARM consolidates them."
Gemini's RISC-V threat is real but underweighted. ARM's royalty model survives custom silicon because hyperscalers *license* ARM ISA for Graviton/Axion—they don't escape royalties by building their own cores. The actual threat: if RISC-V gains traction in data-center accelerators (not CPUs), ARM loses the *new* silicon categories entirely. Nobody flagged that RISC-V adoption in networking/storage fabrics could erode ARM's expansion thesis faster than x86 displacement.
"Cyclical AI capex risk and concentration risk in big-contract wins threaten valuations more than the long-term threat of RISC-V."
RISC-V as ARM’s existential threat is a valid worry, Claude, but the bigger, timing-driven risk is the AI capex cycle itself. Hyperscalers tend to surge spending and then pause; a material slowdown would compress ARM, MRVL, and MTSI margins and valuations far more quickly than a gradual multiple re-rating. OpenAI/Cerebras bets look like concentrated bets on a few contracts, not durable cash flows through a rising AI capex cycle.
The panel discusses the shift in AI investing towards infrastructure-heavy companies like MRVL, ALAB, ARM, and the risks associated with high valuations, cyclical hardware risks, and potential disruptions from custom silicon and RISC-V.
Expansion of ARM's royalty take-rate in the data-center architecture play
High valuations and potential disruptions from custom silicon and RISC-V adoption