Chip stocks continue to surge. Here's how to buy into the trend for less

• MRVL's 14-day RSI is above 70 and the stock hit new highs, with options pricing a 13.5% post-earnings move versus an 8.5% historical average
• Suggested trade: Sell June 5th weekly $162.50 put at $3.60 premium, offering 2.2% return in 11 days (70% annualized) with breakeven at $158.90
• The forward P/E of 45x represents a decade high, leaving no room for disappointment given aggressive revenue and earnings growth expectations

Summary

Key Company & Performance:

Marvell Technology (MRVL) is experiencing a significant rally, up over 130% year-to-date and more than 220% over the past 52 weeks. The chip stock is positioned at the intersection of hyperscaler capital expenditures and custom ASIC demand, benefiting from strong AI infrastructure tailwinds.

Valuation Concerns:

Despite positive fundamentals, MRVL is trading at extended levels ahead of its Tuesday earnings report. The 14-day RSI exceeds 70, indicating potential overbought conditions. The forward P/E ratio has reached approximately 45x—a 10-year high—while the stock trades significantly above its long-term moving average. Options markets are pricing a 13.5% post-earnings move, compared to the decade-long average of 8.5%.

Trading Strategy:

Rather than chasing the stock at current levels, the analyst proposes a conservative options strategy:

• Sell the June 5th weekly $162.50 put at $3.60 premium
• Breakeven: $158.90 (approximately 19% below current levels)
• Maximum profit: $3.60 if MRVL stays above $162.50
• Standstill yield: 2.2% in 11 days (70% annualized)

Market Implications:

The elevated valuation leaves little room for disappointment, requiring flawless execution to justify current multiples. The strategy reflects institutional caution toward momentum stocks, emphasizing the principle of "buying weakness, not chasing strength" even when fundamental stories remain compelling. This high-probability approach allows exposure while generating income and providing downside protection.