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Investing.com – Marvell Technology surged on Monday as Wells Fargo (NYSE:WFC) upgraded its outlook on the chipmaker, betting that the revival in data center spending and the rollout of 5G-enabled phones would boost chip sales.
Wells Fargo (NYSE:WFC) upgraded Marvell to outperform from market perform and raised its price target on the chipmaker's stock to $35 from $32 a share. Marvell Technology (NASDAQ:MRVL) shares surged 6%.
With the era of 5G-enabled smartphones underway, the adoption of Marvell's 5G chips is at a "tipping point" and will likely experience a surge in demand, underpinning sales, according to Wells Fargo analyst Gary Mobley.
"We believe Marvell should continue to experience robust 5G-basestation-related sales to Nokia (HE:NOKIA) and Samsung (KS:005930) for the balance of 2019 and into 2020," Mobley said.
The revival of spending in the data-center market will also be a tailwind, Mobley noted.
Spending on data-center equipment is forecast to decline 2.8% to $204 billion in 2019, driven by a decline in spending on servers amid a drop in average server selling prices, according to research firm Gartner.
Marvell's surge was also supported by a broader move higher in chip stocks amid positive developments on the U.S.-China front.
U.S. Commerce Secretary Wilbur Ross told Bloomberg on Sunday that U.S.-based companies would be issued with licenses to sell to Chinese tech-giant Huawei “very shortly.”
U.S. semi suppliers like Micron Technology (NASDAQ:MU) that count Huawei as an important customer were higher. The Philadelphia Semiconductor Index was up 1.9%, taking its gains for the year so far to 49%.