Marvell Stock Waffles on $115 Billion Bet on AI Infrastructure’s Future

Marvell – the extra letter L means we’re talking about optical components and not the optical blasts of the X-Men’s Cyclops – is making the AI cycle’s biggest M&A plays.

The Santa Clara, Calif.-based semiconductor group announced a $115 billion bet on AI infrastructure with the acquisition of Lumentum, which would massively expand its portfolio of optical components used in data centers and create a “category leader in AI connectivity.” The all-stock deal, if completed, would be the biggest ever merger of two publicly listed American tech companies, though one financial services firm wondered whether they’ll ultimately make it down the wedding aisle.

A Connection Is Made

Marvell is chip designer to the hyperscaler stars. The 31-year-old company develops tailor-made AI accelerator chips for hyperscalers, among them Amazon and Microsoft. In July, Google secured the right to buy up to $12.2 billion in Marvell shares as part of a deal to jointly develop custom AI chips.

It’s also grown significantly in recent years via acquisition, including a $5.5 billion deal for optical interconnectivity startup Celestial AI that closed in February. And so cue Monday’s announcement that it plans to acquire San Jose-based Lumentum, a much larger specialist in optical connectivity. Data centers and AI processors are increasingly reliant on optical and photonic networks as light and lasers carry far more data at faster speeds than traditional copper wire systems. The Lumentum takeover is a wager that bigger, more sophisticated clusters of AI chips will need more sophisticated networking infrastructure. The deal comes right on the heels of a jittery October for the AI infrastructure trade, which dragged the tech-heavy Nasdaq 100 down 6.7% last month, its worst since March 2025.

Since it’s an all-stock deal, the actual value of the Lumentum acquisition depends on what Marvell shares are worth when it closes, which is not expected to happen until the first half of 2028. Lumentum shareholders will then get 4.5 Marvell shares for every Lumentum share. And, after Monday’s market reaction, they’re suddenly worth a fair bit less. Marvell closed down 12.7%, while Lumentum sank 18.6% (shares in Marvell are still up 90% this year and Lumentum is up 77%). Analysts at Morningstar said the deal “makes sense” insofar as it adds to Marvell’s optical portfolio, which could capture more AI infrastructure spending going forward. But, they warned of an overpay or ultimately no acquisition:

• “This deal is only market talk for now,” they wrote. “We put the probability that a deal goes through somewhere below 50% and worry about the price Marvell shareholders would pay.”
• “Lumentum’s extraordinary results have been at least partially driven by pricing and tight supply, while low-priced competition lurks in China,” they added. “If current results turn out to be even partially cyclical, Marvell could be overpaying for a weaker asset than it bargained for.” On the other hand, they forecast Lumentum will post a 46% five-year compound growth rate and said cross-selling and shared costs make a bull case for the merger.

Vote of Confidence: Nvidia invested $2 billion each in Marvell and Lumentum, both suppliers, in separate deals this spring. Earlier this year, CEO Jensen Huang called Marvell, currently worth roughly $150 billion, the “next $1 trillion company.”