In a $115 billion all-stock deal that includes debt, Marvell Technology is acquiring optical components manufacturer Lumentum.
The bespoke chipmaker is competing with larger rival Broadcom in an attempt to profit from the surge in AI spending.
The agreement, which was made public on Monday, is one of the largest in 2026 and one of the most audacious wagers on the AI development that chip executives anticipate would support industry demand for years to come.
However, investors are starting to question the sustainability of the high expenditure due to shrinking margins and sluggish cash flow, which is causing a selloff in chip stocks.
Buy COMPLETE GLOBAL TRADE MASTERY @ https://selar.com/p/51175y15ag?affiliate=t3ke
“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” stated Matt Murphy, CEO of Marvell, who will continue to serve as chairman and CEO of the merged business.
Our goal is to significantly increase stockholder value and contribute to the development of the next generation of AI connectivity.
Marvell’s stock was down 0.7% before the bell, while Lumentum’s dropped 1.5%.
Due to worries about the AI bubble, both stocks have dropped significantly since deal talks were initially revealed late last month.
Marvell is wagering that Big Tech’s AI expenditure boom is here to stay and will keep demand for optical components needed to transfer data at fast speeds outpacing supply by purchasing Lumentum, a business that is about half its size.
Buy E-COMMERCE BUILDER BUNDLE @ https://selar.com/p/r78po4856y?affiliate=3bl5
High-performance lasers and optical components utilized in communications networks, cloud computing, and artificial intelligence are among the photonic goods produced by Lumentum.
Requests for comment on the purchase were not immediately answered by AI chip giant Nvidia, which invested $2 billion each in Marvell and Lumentum earlier this year.
Marvell was a relatively unknown chipmaker just three years ago. However, since then, its market worth has increased to over $170 billion as a result of its assistance to tech behemoths like Amazon and its development of specialized AI processors and networking technology for data centers.
Marvell projected $70 billion to $90 billion in fiscal 2031 revenue during its investor day in October.
Buy CHINA IMPORTATION MASTERCLASS @ https://selar.com/p/9c5884f481?affiliate=98wu
About $37.5 billion of that is anticipated to come from the interconnect industry, which it projects would increase at a rate of 65% annually to reach $65 billion by 2030.
How the deal works.
Under the agreement announced Monday, Marvell will pay Lumentum shareholders $1,132 per share, all in stock.
That is 23.9% above where Lumentum last closed before news of the talks broke on October 28, and it values Lumentum’s equity at $102.54 billion.
Each Lumentum share converts into 4.5 Marvell shares, which would leave Lumentum holders with about one-third of the combined company on a fully diluted basis.
Marvell says the merger would grow the combined company’s total addressable market to $550 billion.
Buy varied products. @ https://selar.com/m/Ltrust?affiliate=tyvl
Both boards approved the deal unanimously, and it is expected to close in the first half of calendar 2028.
Lumentum could gain from a proposed China ban.
Lumentum competes with US-listed Coherent and China’s Zhongji Innolight. It stands to benefit from a proposed US ban on new Chinese optical transceivers, which could push demand toward domestic suppliers.
Separately, the company guided second-quarter revenue to between $1.58 billion and $1.63 billion, above the $1.48 billion average analyst estimate compiled by LSEG.
Marvell’s photonics push.
Marvell has been building out its photonics business this year, completing a $3.5 billion purchase of Celestial AI in February.
The growing use of AI agents and chatbots is fueling demand for faster optical links between the thousands of chips inside AI data centers.
Buy @ https://nestuge.com/digitalproductsnew?affiliate=YgeqiT
Marvell’s stock 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 doubled, from $3 billion in fiscal 2021 to $8.2 billion in fiscal 2026.
The Lumentum acquisition is Marvell’s biggest since it bought Inphi for $10 billion in 2021.
