If You Only Invest in the Vanguard S&P 500 ETF, You're Missing Out on This Stellar Artificial Intelligence (AI) Semiconductor Stock

The Vanguard S&P 500 ETF (NYSEMKT: VOO) offers one of the simplest and most effective ways to invest in a broad range of stocks. The index fund closely tracks the S&P 500, and it charges a minuscule expense ratio to ensure its shareholders receive their fair share of the market returns.

Those returns have been driven in large part by artificial intelligence (AI) stocks over the last couple of years. The stellar performances of 2023 and 2024 are due to just a handful of AI leaders skyrocketing in value.

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But while the S&P 500 is full of some great tech companies leading innovations in AI, not every great AI stock is included in the index.

The index is widely regarded as the benchmark for the broader stock market. And although it consists of 500 of the largest companies in the market, there are a few specific requirements for inclusion. First, a company must have its headquarters and a plurality of its assets in the United States. Second, it must be profitable on the basis of generally accepted accounting principles (GAAP) in its most recent quarter and on a trailing-12-month basis.

As a result, several key semiconductor stocks are left out of the index, and by extension the Vanguard S&P 500 ETF. One AI stock worth taking a closer look at to supplement the index fund is Marvell Technology (NASDAQ: MRVL). It currently trades at an attractive price and can be a great addition to any portfolio.

Image source: Getty Images.

A company growing its share of the AI chip market

Marvell has a broad portfolio of chip designs including network switches, optical communication, and processors. All three of these play an important role in the development and advancement of artificial intelligence.

Networking equipment is essential for ensuring data in an AI accelerator cluster gets from one place to another as quickly and efficiently as possible. It reduces redundancy and downtime. In other words, it ensures cloud customers are getting the most possible from the expensive processing chips they put in their data centers.

When it comes to networking chips, Marvell is working to take share from market leader Broadcom. Marvell's specialization and ability to offer customized solutions has helped it win big contracts with the hyperscalers. For example, it announced a custom network interface controller chip for Meta Platforms last year.

The company is also seeing strong adoption for its custom AI accelerators by companies like Amazon, which tapped Marvell for help with its Trainium 2 chips. As their name implies, these chips are used for training large language models.

Its inference chip, Inferentia, is set to move to a Marvell design this year. Marvell also works with Alphabet on its Axion CPU, and with Microsoft on its Maia AI accelerator (which management says will ramp up in 2026).

Not only does Marvell see the total addressable market for its data center chips growing an average of 29% per year from 2023 through 2028, it also expects to practically double its market share over that period as well.

Based on the progress it's made with the hyperscalers in 2024, that seems feasible. Management said AI chips accounted for well over $1.5 billion of its revenue for fiscal 2025 (ended in January) and expects to "very significantly exceed" its $2.5 billion target next year.

That's reflected in Marvell's data center revenue, which climbed 78% year over year and 24% sequentially last quarter. That has come at the cost of its other segments, however, which combined shrank by 32% year over year.

That said, its other segments appear to have stabilized in the fourth quarter, showing sequential gains for the most part. As such, AI chips should drive significant growth for Marvell.

Why isn't it in the S&P 500?

Marvell is a U.S. based company, but it hasn't been consistently profitable on a GAAP basis since 2018. There's a very specific reason.

Management started acquiring smaller companies with specialization in certain technology that year. It started with the $6 billion acquisition of Cavium, which produces in network chips. It made several more big purchases between 2019 and 2021. The result is a significant intangible asset amortization expense that gets included in its GAAP earnings.

That noncash expense dragged down the company's reported GAAP earnings by about $1 billion in each of the last four years. Without that, Marvell would be profitable and likely included in the S&P 500.

As is, the company produced a GAAP profit of $200 million last quarter. Management expects to remain GAAP profitable throughout the current year as well, as it scales up its data center business.

Meanwhile, non-GAAP (adjusted) earnings are a better indicator of Marvell's financial health. Shares currently trade for just 25 times analysts' consensus estimate for adjusted earnings per share in fiscal 2026.

Considering analysts expect adjusted earnings to increase 135% over the next two years, that's an incredible price for the chipmaker. And if it remains GAAP profitable, it could be included in the S&P 500, giving the stock another catalyst to boost its price.

For now, though, it remains outside the benchmark index. But the Vanguard S&P 500 ETF and other index investors who want in on the AI stock may consider adding a small amount to their portfolio.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and Marvell Technology and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.