Marvell Is Betting $115 Billion on 1 of AI's Biggest Bottlenecks
The chipmaker is paying a premium price to protect its biggest business.
Marvell Technology is making a $115 billion bid for optical networking company Lumentum, aiming to secure a crucial component in its AI-focused business. The deal is an all-stock offer, where shareholders will receive 4.5 shares of Marvell for each share of Lumentum they own, leading to dilution. While Marvell sees connectivity as its biggest business with a 65% CAGR in the market, the optical interconnect chips it relies on face a supply shortage.
Lumentum's CEO, Michael Hurlston, predicts this shortage could persist until 2029, with gross and operating margins expanding significantly. The acquisition would give Marvell a complete portfolio of optical chips and packages, matching the scale of Broadcom. However, investors should be cautious, as the deal's premium pricing may drop if the supply shortage eases or demand slows.
The outcome will depend on Lumentum's commentary over the next year, with the deal expected to close in 2028.
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