The chipmaker projected sales of about $1.88 billion for its fiscal first quarter, below some estimates that climbed as high as $2 billion.

That figure, although in line with the average analyst forecast, sparked a sell-off that sent Marvell’s shares plunging 16 per cent. Broadcom another chipmaker riding the AI wave, saw its stock slip 3.5 per cent in after-hours trading in the wake of Marvell’s lacklustre guidance.

Marvell’s high-flying reputation has been fuelled by its role in crafting semiconductors for powerful data centres and AI computing systems, surging investor expectations to a fever pitch.

The Silicon Valley stalwart, which counts Amazon among its biggest customers, had previously posted glowing results that vaulted its shares to record highs.

But market enthusiasm for AI-based hardware has taken a beating this year, with some Chinese software upstarts claiming they can develop AI models more cheaply and effectively, suggesting that the spending spree on pricey equipment may be cooling off.

Analysts and investors had been waiting for Marvell’s latest announcement, hoping it would ease the sector's current nervousness.

Instead, the company reported fourth-quarter revenue of $1.82 billion, a 27 per cent jump from a year earlier that narrowly beat Wall Street’s projections. Yet, the gloomy forecast overshadowed it.

Marvell CEO Matt Murphy said:“Our custom AI silicon programs have now entered volume production, and we continue to see strong growth from our interconnect products. Marvell has secured multiple new design wins, including several custom silicon programs that will fuel future growth” .

Marvell offered earnings guidance of 56 cents to 66 cents a share in the current quarter—analysts had been looking for 60 cents—leaving market players disappointed by the modest outlook.

While most normal investors would have been happy, Marvell’s numbers are being seen by Wall Street as proof that the AI spending boom may be showing cracks despite evidence to the contrary.

Stifel Financial analyst Tore Svanberg said: “Investors were already very ‘skittish’ about AI names the last few weeks and Marvell’s report probably doesn’t help calm those nerves.”