Marvell shares jump 9.8% on Google chip design deal

Marvell Technology Inc. recently announced a contract to design artificial intelligence chips for Google LLC, which marks a significant deal for the Santa Clara, California-based company. The agreement extends beyond AI chip design, with Google purchasing approximately 59 million units of Marvell common stock worth $12.2 billion.

As a major supplier of data center chips, Marvell provides products in optical networks, storage equipment, and hardware security modules where companies store their encryption keys. The company has also been involved in custom chip development. In the partnership with Google, Marvell will develop custom chips that fit into the TPU ecosystem, which powers the search giant's public cloud with proprietary AI accelerators called Tensor Processing Units (TPUs).

One priority of the partnership is to create custom inference chips, possibly developing future iterations of the TPU 8i, an inference-optimized chip introduced in April. The TPU 8i can store the KV cache, a data structure used by large language models to store information for prompt answers, entirely on-chip, eliminating delays associated with external memory.

Additionally, the chip includes a module called CAE, optimized for speed in chain-of-thought reasoning workloads. The chip design deal with Marvell prioritizes the development of custom network interface controllers, which optimize traffic flow between servers and the host data center's network. Marvell will also help Google develop storage controllers and memory interface controllers to manage storage arrays and RAM devices, respectively, along with custom near-memory computing devices that reduce latency by placing logic circuits and memory modules near each other.

The warrant issued by Marvell enables Google to buy shares at $206.58 per share, and the company's stock closed at $237 today. Marvell's $960 million batch of shares vests over the next year, while the remaining $11.4 billion will vest in 240 tranches through fiscal 2033.