Marvell gives Google option to buy $12.2 billion stake in custom AI chip deal

Marvell Technology has teamed up with Google to develop the latter's custom chips, offering the tech giant the right to purchase a potential $12.2 billion stake in the venture. The agreement, which comes as big tech companies increasingly invest in suppliers powering AI initiatives, is expected to generate around $120 billion in revenue for Marvell through fiscal 2033, provided Google fulfills the terms of its stake option.

Shares in Marvell surged nearly 8% following the announcement, while rival Broadcom saw a more than 5% decline and Alphabet's shares remained relatively stable. The growing demand for in-house chips like Google's tensor processing units (TPUs), which are more cost-effective alternatives to Nvidia's expensive graphics processors and better tailored for inference tasks, has been a key driver behind such deals.

The Marvell-Google partnership encompasses a wide array of technologies related to TPUs, including AI model-running processors, data storage management, and network information transfer. Google has been granted the right to acquire up to 58.97 million Marvell shares at $206.58 per share, amounting to $12.18 billion if the option is exercised in full.

Analysts view this as a significant endorsement for Marvell and a growing opportunity for Google to diversify its AI infrastructure sources, rather than a direct challenge to Broadcom's dominance in the market.