Semiconductor maker Marvell Technologies (NASDAQ:MRVL) has announced plans to acquire fellow California company Lumentum (NASDAQ:LITE) in an all-stock transaction worth an estimated $115 billion.
According to CNBC analysts, this is “one of the most significant bets on AI” of the year — no small feat, given the high-dollar transactions that are the norm in the industry.
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Marvell is interested in Lumentum’s optical connectivity technology, which helps connect together the chips used to run and train large language model products like ChatGPT, Gemini and Claude.
Lumentum shareholders will receive 4.5 Marvell shares for every share of Lumentum. The deal isn’t expected to close until 2028. The exact value of the deal will depend on the price of Marvell shares at the time the purchase goes through.
Markets did not react well to the news. Marvell shares cratered 13% and Lumentum by almost 19%. According to reporting in the Motley Fool, the reason for this is likely simple: Investors think Marvell overpaid. The share price of Lumentum has skyrocketed by more than 450% in the past year (prior to today’s dip) on the back of AI hype.
This comes on the heels of a very wobbly week for the sector, to say the least. Tech stocks took a tumble late last week as disappointing earnings results came in for the third quarter. Both Google and Intel missed expectations and fell by 12% and 30% respectively, wiping out hundreds of billions in value, dragging the Nasdaq stock exchange down, and raising concerns about the fragile AI bubble showing signs of popping.
Nvidia: A key behind-the-scenes player
Marvell and Lumentum have an important major investor in common: computing giant Nvidia, which makes processors that go in the computers powering the AI revolution. It sank $2 billion into each company earlier this year.
Nvidia has been under fire for years for its circular financing, which has become commonplace across the AI industry — but poses significant financial risks to those companies and the whole economy.
AI companies are investing in each other while also buying and selling to one another, creating a morass of financial dealings that can be hard for a civilian to parse. For example, in September 2025, Nvidia invested $100 billion in OpenAI, the maker of ChatGPT, to finance the building of data centers. Those data centres are to be filled with computer parts purchased from Nvidia. And that’s just one of dozens of such deals. The concern is that, because of how tightly connected these nominally independent, competing companies are, a financial problem at one, or a weakness in the broader economy, could result in a chain reaction.
Matt Murphy, CEO of Marvell, has minimized these concerns.
“This is a double-down on supporting Nvidia, who is the ecosystem leader in this area,” Murphy told CNBC. “We’re very committed to that partnership, and I think having two of the key suppliers come together, that support that ecosystem, is going to be a big benefit for them.”
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A tech kingmaker?
Back in June, Nvidia CEO Jensen Huang jumped into the prediction game by naming which company will be the next to join an exclusive club of predominantly tech firms with valuations of at least $1 trillion. He put his money on Marvell.
Marvell’s market cap is currently $150 billion. So it’s about 15% of the way there.
While delivering a keynote address at a conference in Taiwan, Huang touted Marvell as “the next trillion-dollar company” and sang Murphy’s praises, calling the company “so essential.”
His comments sent Marvell stock soaring by nearly 30% to a record $285 per share. It’s now $171.
Huang added that interconnection, which Marvell and Lumentum specialize in, stands to be the next phase in the AI development blitz.
“When you take a computing problem, and you disaggregate it into a lot of parts, and you distribute it across the entire data center, what’s necessary is connectivity,” he said.
Over a dozen companies make up the $1-trillion club, according to Bankrate. Microsoft, Apple, Alphabet, and Amazon are part of the roster. Over the summer, the chipmaker Samsung joined them as corporate appetite for advanced chips has proven bottomless, and demand isn’t expected to ease up anytime soon in the AI infrastructure buildout. SpaceX is also on the list after its IPO this summer.
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Updated with files from Moneywise editor G.M. Buck
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.