Marvell acquires Lumentum in $115 billion push to dominate AI connectivity
The deal combines Marvell's custom chip and networking expertise with Lumentum's optical technology, targeting a market the companies say could reach $550 billion.
Marvell Technology is acquiring optical components maker Lumentum in an all-stock transaction valued at $115 billion, including debt, as the custom chipmaker takes on larger rival Broadcom in the race to capitalize on the AI spending boom.
The deal, announced Monday, is one of the largest technology transactions of 2026 and among the boldest bets yet on the AI infrastructure buildout that chip executives expect to drive industry demand for years to come.
The acquisition comes as the AI spending boom faces a growing reality check. Investors are increasingly questioning whether the massive investments can be sustained amid tightening margins and slowing cash flow, triggering a selloff in chip stocks.
“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” said Marvell CEO Matt Murphy, who will remain chairman and CEO of the combined company.
“We intend to help shape the next era of AI connectivity and create exceptional stockholder value.”
Lumentum shares fell 1.5% in premarket trading on Monday, while Marvell was down 0.7%. Both stocks have declined sharply since reports of deal talks first emerged late last month, amid growing concerns about an AI bubble.
By acquiring Lumentum, a company roughly half its size, Marvell is betting that the AI spending boom among major technology companies will continue and that demand for optical components capable of moving data at high speeds will remain ahead of supply.
Lumentum manufactures photonic products, including high-performance lasers and optical components used in AI, cloud computing and communications networks.
Nvidia, which invested $2 billion each in Marvell and Lumentum earlier this year, did not immediately respond to a request for comment on the transaction.
Just three years ago, Marvell was a relatively little-known chipmaker. Its market value has since climbed to more than $170 billion, driven by its role in helping technology giants such as Amazon develop custom AI chips and networking technology for data centers.
“Combining Marvell's custom chips and networking expertise with Lumentum's optical components could give it a much stronger hand as data centers demand ever-faster, more energy-efficient connections,” said Axel Rudolph, chief technical analyst at IG Group.
“But this is an enormous bet, and investors are right to ask whether Marvell is paying too much and taking on too much at once.”
Monday's acquisition could also strengthen Marvell's position in its competition with Broadcom, which has long served as Google's main custom-chip partner and offers customers a broader range of AI data center hardware under one roof.
Marvell secured one of its biggest wins in August, signing an agreement to supply chips that work alongside Google's AI processors in a deal that could generate up to $120 billion in sales through fiscal 2033. The agreement also gives Google the right to acquire a $12.2 billion stake in Marvell.
At its investor day in October, Marvell forecast fiscal 2031 revenue of between $70 billion and $90 billion. It expects approximately $37.5 billion to come from its interconnect business, a market it predicts will grow by 65% annually to reach $65 billion by 2030.
Under the agreement announced Monday, Marvell will pay $1,132 per Lumentum share in stock, representing a 23.9% premium to Lumentum's last unaffected closing price on October 28, before reports of deal talks first emerged.
The transaction gives Lumentum an equity valuation of $102.54 billion.
Marvell said the acquisition would expand the combined company's total addressable market to $550 billion.
Lumentum shareholders will receive 4.5 Marvell shares for each Lumentum share they own, giving them approximately 33% ownership of the combined company on a fully diluted basis.
The transaction was unanimously approved by the boards of both companies and is expected to close in the first half of calendar year 2028.
Lumentum, which competes with U.S.-listed Coherent and China's Zhongji Innolight, could benefit from a proposed U.S. ban on new Chinese optical transceivers. Such restrictions could shift demand toward domestic suppliers.
Separately, Lumentum said it expects second-quarter revenue of between $1.58 billion and $1.63 billion, exceeding analysts' average estimate of $1.48 billion, according to data compiled by LSEG.
Marvell has already been expanding its photonics business this year. In February, it completed its $3.5 billion acquisition of Celestial AI, as the growing use of AI agents and chatbots drives demand for faster optical links connecting thousands of chips in AI data centers.
Marvell shares hit a record high in June after Nvidia CEO Jensen Huang described the custom chipmaker as the next “trillion-dollar company.” Its annual revenue has more than doubled, rising from $3 billion in fiscal 2021 to $8.2 billion in fiscal 2026.
The Lumentum acquisition would be Marvell's largest purchase since its $10 billion acquisition of Inphi in 2021.
