Marvell Technology announced on Monday that it will buy optical components maker Lumentum in an all-stock deal worth $115 billion, one of the biggest takeovers of the year. The price works out to about $1,132 per Lumentum share, a 23.9 percent premium over the price before reports of the talks first surfaced on October 28. Lumentum shareholders will receive 4.5 shares of Marvell stock for each share they own, and they will end up holding about a third of the combined company. Marvell shareholders keep the other two-thirds. The deal still needs approval from shareholders and regulators, and the companies expect it to close in the first half of 2028.
The deal is really about what happens inside an AI data center. Thousands of chips work on a single AI model at the same time, and they constantly pass enormous amounts of data back and forth. Copper wires have carried that traffic for decades, but they are running into physical limits as data centers grow bigger and faster. Light moving through fiber can carry far more data over longer distances while using less power, so the industry is shifting toward optical connections. Marvell makes the electrical chips and switching gear that sit at each end of those connections, while Lumentum makes the lasers and optical parts that turn data into light. Put the two together and one company can sell the whole link, from chip to laser to fiber.
Marvell is paying up because it sees a $550 billion market for this kind of connectivity, and it expects the combination to save more than $1 billion a year in costs once the two companies are fully merged. The deal is expected to add to Marvell's non-GAAP earnings per share in the first year after it closes. Marvell chief executive Matt Murphy called the shift to optical connectivity an opportunity that comes along once in a generation, and he said the companies that move first will set the standard for decades. Lumentum chief executive Michael Hurlston will join Marvell's board along with two other Lumentum directors. The deal is Marvell's biggest purchase since its $10 billion buyout of Inphi in 2021, and it turns a company that was little known three years ago into a much heavier hitter in the chip world.
Marvell has had quite a run. Its market value has climbed past $170 billion, helped by its work building custom AI chips and networking gear for giants like Amazon. In June, Nvidia chief executive Jensen Huang called Marvell the next trillion-dollar company, and Marvell's shares hit a record high that month. In August, Marvell signed a deal to supply chips that sit alongside Google's AI processors, worth up to $120 billion in sales through fiscal 2033, with Google getting the right to buy a $12.2 billion stake. Nvidia itself invested $2 billion in Marvell earlier this year, and it put another $2 billion into Lumentum. Marvell also bought photonics startup Celestial AI for $3.5 billion in February, so this deal is the second big step in the same direction this year.
There are reasons to keep the excitement in check. Both companies' shares have fallen since the talks were first reported late last month, with Marvell down about 22 percent and Lumentum down about 8 percent, as a wider chip selloff followed Intel's weak forecast. The deal is paid for entirely in Marvell stock, so the final value depends on where Marvell's share price lands when the deal closes, which is still more than a year away. Regulators and shareholders still have to sign off, and regulators have blocked big chip deals before. Lumentum also faces competition from Coherent and from Chinese suppliers, although a proposed US ban on new Chinese optical transceivers could shift some business its way.
The size of the number is the story. A $115 billion bet says the companies building AI data centers believe the next bottleneck is not the chips themselves but the connections between them. If they are right, the winners of the AI boom will include the companies that move data as light, not just the ones that crunch the numbers. If they are wrong, Marvell will have paid a premium for a bet that took nearly two years to close. Either way, the deal puts Marvell squarely in the middle of the race with Broadcom to supply the plumbing of the AI era, and that race is now worth paying attention to.
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Author: Ryan Gardner, Silicon Valley News Desk