Nov 2 (Reuters) – Marvell Technology is buying optical components maker Lumentum in a $115 billion all-stock deal, including debt, as the custom chipmaker looks to challenge larger rival Broadcom and take advantage of the AI spending boom.
The deal, announced on Monday, is one of the biggest in 2026 and among the boldest corporate bets yet on an AI boom that chip executives expect to underpin industry demand for years.
“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.”
Shares of Lumentum were down 0.6%, while Marvell was little changed in premarket trading.
By buying Lumentum – a company roughly half its size – Marvell is betting that Big Tech’s AI spending boom is here to stay and would keep demand for optical components used to move data at high speeds outstripping supply.
Lumentum makes photonic products, including high-performance lasers and optical components used in AI, cloud computing and communications networks.
AI chip giant Nvidia invested $2 billion each in Marvell and Lumentum earlier this year.
Just three years ago, Marvell was a relatively little-known chipmaker. But its market value has since surged to more than $170 billion, thanks to its role in helping tech giants such as Amazon develop custom AI chips and networking technology for data centers.
Monday’s deal could also add more muscle to Marvell in its race with rival Broadcom, which has long been Alphabet-owned Google’s main custom-chip partner and offers customers a broader menu of AI data center hardware under one roof.
Marvell notched one of its biggest wins in August, signing a deal to supply chips that sit alongside Google’s AI processors worth up to $120 billion in sales through fiscal 2033, giving the search giant the right to buy a $12.2 billion stake.
At its investor day in October, Marvell forecast fiscal 2031 sales of $70 billion to $90 billion. It expects around $37.5 billion of that to come from interconnect, a market it expects to grow 65% a year to $65 billion by 2030.
HOW THE DEAL IS STRUCTURED
Under Monday’s agreement, Marvell will pay $1,132 per share in stock, a 23.9% premium to Lumentum’s last unaffected closing price on October 28, before deal talks were first reported.
That gives the deal an equity value 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 roughly 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 2028.
LUMENTUM MAY BENEFIT FROM PROPOSED CHINESE BAN
Since the Marvell-Lumentum talks were first reported late last month, Lumentum’s shares have fallen about 8% and Marvell about 22%, as a broad-based chip selloff accelerated following Intel’s weak forecast.
Lumentum, which competes with US-listed Coherent and China’s Zhongji Innolight, stands to benefit from a proposed US ban on new Chinese optical transceivers that could shift demand toward domestic suppliers.
Separately, Lumentum said it expects second quarter revenue between $1.58 billion to $1.63 billion, exceeding analysts’ average estimate of $1.48 billion, according to data compiled by LSEG.
Marvell has already been beefing up its photonics business this year. It closed a $3.5 billion purchase of Celestial AI in February as rising use of AI agents and chatbots drives demand for faster optical links connecting thousands of chips in AI data centers.
Shares of Marvell hit a record high in June after Nvidia CEO Jensen Huang called the custom chipmaker the next “trillion-dollar company.” Its annual revenue has more than doubling from $3 billion in fiscal 2021 to $8.2 billion in fiscal 2026.
Marvell’s acquisition of Lumentum is its largest purchase since its $10 billion buyout of Inphi in 2021.
(Reporting by Anhata Rooprai in Bengaluru; Editing by Arun Koyyur)
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