Marvell Technology Inc.’s (NASDAQ:MRVL) upcoming inclusion in the S&P 500 Index could create a new source of demand for the AI networking chipmaker just days after a sharp sell-off exposed investor concerns about stretched valuations in the semiconductor sector.
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Shares of Marvell surged more than 10% Monday after S&P Dow Jones Indices announced the company would join the benchmark index on June 22. The addition comes after a remarkable run for the stock, which has gained more than 250% year-to-date as investors have poured into companies seen as key beneficiaries of the artificial intelligence infrastructure boom.
The timing is notable. Marvell’s inclusion follows one of the most volatile weeks in the stock’s history. After NVIDIA Corp (NASDAQ:NVDA) CEO Jensen Huang publicly described Marvell as “the next trillion-dollar company” during an appearance alongside CEO Matt Murphy in Taipei, the stock posted its biggest-ever one-day gain and briefly reached a record high. However, three days later on Friday, shares plunged more than 16% as semiconductor stocks suffered their worst sell-off since 2020.
Passive ETF Demand Comes Into Focus
While the debate around Marvell’s valuation continues, its entry into the S&P 500 introduces a powerful technical catalyst: passive fund buying.
Index-tracking funds that replicate the S&P 500 will be required to purchase Marvell shares as part of their rebalancing process. The largest products tracking the benchmark include the SPDR S&P 500 ETF Trust (NYSE:SPY), the iShares Core S&P 500 ETF (NYSE:IVV), and the Vanguard S&P 500 ETF (NYSE:VOO).
Marvell’s weighting in the S&P 500 is likely to be relatively small compared with mega-cap members; the sheer scale of assets tied to the S&P 500 could generate significant buying interest as index funds rebalance to reflect Marvell’s inclusion.
The S&P 500 is market-cap weighted, and with a market value of roughly $230 billion, Marvell, although large enough to qualify for the index, remains significantly smaller than mega-cap members such as Nvidia, Microsoft Corp (NASDAQ:MSFT), and Apple, Inc (NASDAQ:AAPL), each of which is valued in the trillions of dollars. As a result, Marvell’s initial weighting is likely to be less than 1% of the benchmark.
The impact of inclusion should not be underestimated. According to S&P Dow Jones Indices, approximately $20 trillion in assets are indexed or benchmarked to the S&P 500, including about $13 trillion in passively managed assets. That means even a relatively small index weighting can translate into substantial buying activity as index funds and ETFs rebalance their portfolios. The three largest S&P 500 ETFs — SPY, IVV, and VOO — collectively manage more than $2 trillion in assets, and hence it is self-explanatory how additions to the benchmark can create a significant source of demand for newly included stocks.
Historically, stocks added to major indexes often experience a short-term boost as passive managers accumulate shares ahead of inclusion dates. For Marvell, the development arrives at a time when investors are questioning whether the stock’s rally has moved too far ahead of fundamentals.
Semiconductor ETFs Already Have Significant Exposure
Marvell is already a meaningful holding in several semiconductor-focused ETFs that have been among the biggest beneficiaries of the AI trade.
The VanEck Semiconductor ETF (NASDAQ:SMH), the largest semiconductor ETF with more than $40 billion in assets, holds concentrated positions in leading AI-related chipmakers, including Nvidia, Broadcom Inc. (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing (NYSE:TSM) and Marvell.
The iShares Semiconductor ETF (NASDAQ:SOXX), another widely followed semiconductor fund, also allocates a significant portion of its portfolio to companies supplying AI infrastructure, networking, memory, and advanced computing components.
These funds have delivered strong gains throughout 2026 as investors bet on sustained spending on AI data centers. But last week’s sell-off highlighted the risks associated with increasingly concentrated exposure to a handful of high-growth chip names.
SOXX fell roughly 10% during Friday’s rout, marking its steepest one-day decline since the COVID-19 pandemic-era market turmoil of March 2020. SMH also tumbled more than 9% on Friday. Semiconductor stocks collectively shed nearly $1 trillion in market value as investors reacted to Broadcom unchanged AI revenue outlook and stronger-than-expected U.S. jobs data that pushed Treasury yields higher.
Nonetheless, both funds recovered on Monday, up more than 5%-6%.
Can ETF Flows Override Valuation Concerns?
The key question for investors is whether incoming passive ETF demand can outweigh growing concerns about valuation.
Marvell currently trades at a premium multiple relative to its historical averages, reflecting expectations that AI networking and custom-chip demand will continue to accelerate. The MRVL stock is currently trading at almost 65x forward P/E, which is much higher than its peers Nvidia, Taiwan Semiconductor and Broadcom, according to Benzinga Pro.
The company’s fiscal first-quarter revenue rose 28% year over year to a record $2.42 billion, while management guided current-quarter sales to approximately $2.7 billion.
Bulls argue that Marvell remains one of the clearest plays on AI infrastructure spending, particularly as hyperscale cloud providers increasingly invest in custom silicon and high-speed networking technologies.
Skeptics, however, note that much of the stock’s recent appreciation has been driven by expanding valuation multiples rather than earnings growth alone.
With S&P 500 inclusion, Marvell may receive another near-term tailwind. Whether that support can sustain the stock’s meteoric rise will ultimately depend on the company’s ability to translate AI enthusiasm into continued revenue growth and profits.
Photo: Michael Vi on Shutterstock
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