The Bluebirds could receive up to £5m for the Scotland goalkeeper.
But Giles says the 31-year-old is worth at least £8m, underlining Cardiff's malaise in the Championship.
"They are going to get £3.5m and they're selling him on the cheap. And that tells me where the club is going: nowhere," said Giles.
Marshall agreed personal terms with Hull after being omitted from Saturday's Championship defeat by Reading.
The 31-year-old has made more than 280 appearances for Cardiff since arriving from Norwich City for free in 2009.
Cardiff are 17th in the 24-strong division with one win, two draws and two defeats.
Marshall is widely regarded as their star player and Giles, who had two playing stints with the club lasting a combined total of six years, is unhappy at the player leaving.
"I think it's a joke. Personally I think David Marshall is worth £8m, probably more than that to any club," said Giles before Marshall's move was finalised.
"Football today, I hate it, all these stats - they keep going on with stats, but if you look at Marshall's stats, they would without a doubt be better than anyone in the Championship and be a lot better than goalkeepers in the Premier League and they've let him go.
"Probably if Hull win the Premier League they'll get £5m."
"They are going to get £3.5m and they're selling him on the cheap. And that tells me where the club is going: nowhere."
Giles agrees that Cardiff City need a proven goalscorer, but does not believe one will be signed.
"Without a doubt Cardiff need a striker and talking to fans, they're looking for someone to score 15-20 goals a season," he told Radio Wales Sport.
"Well that's not going to happen this year and unfortunately we're looking at a season where if they finish half way, they've done well.
"Is that going to bring your fans back? You'll always get your diehards going, but is that going to get enthusiastic people coming down to Cardiff City Stadium?
"It's a poor Cardiff City when they're watching second-rate football."

The Coalition of Irish Immigration Centers (CIIC) says it has done so due to changes in immigration enforcement policy under President Donald Trump.
It says the focus has been on people from seven countries named by the president and those with deportation orders or criminal histories.
"This applies to a small portion of the Irish community," it adds.
"Given the change in immigration enforcement policy and implementation, the immigrant community is strongly advised to be vigilant in obeying all local and state laws, especially when driving."
It also advises "those who feel they are at risk of deportation" to speak to a lawyer and be screened for possible benefits or relief.
"Have an emergency and family plan in place in case of arrest, especially involving children."
The organisation advises people to "be wary of rumours about ICE [Immigration and Customs Enforcement] activity, ICE raids or immigration policy changes".
It said Immigration and Customs Enforcement had recently carried out focused enforcement actions and community arrests of about 680 non-citizens, most with criminal histories or prior orders of deportation.
"This operation was not unlike previous enforcement actions in the past," it said.
"However, there have been some reports of secondary arrests of individuals who were not the original focus of the enforcement efforts, resulting from the fact that ICE now has broader authority to arrest anyone who is undocumented."
The Trump administration has issued tough guidelines to widen the net for deporting illegal immigrants from the US, and speed up their removal.
Undocumented immigrants arrested for traffic violations or shop-lifting will be targeted along with those convicted of more serious crimes.
The memos do not alter US immigration laws, but take a much tougher approach towards enforcing existing measures.
There are an estimated 11 million illegal immigrants in the US, about 50,000 of whom are believed to be Irish.
The sale by Cardiff City of captain David Marshall to Hull City has been described as "a joke" by former midfielder David Giles.
[NEXT_CONCEPT]
An organisation that represents immigrant groups has issued new advice to Irish people in the US.