Marvell shares jump 8% after chipmaker hands Google option to buy $12.2 billion stake
Marvell Technology shares surged 8% after the chipmaker struck a new agreement to help develop Google's custom chips, giving investors another reason to bet on the company's role in the artificial intelligence infrastructure boom.
The deal covers a broad range of chips and related technologies designed to work with Google's tensor processing unit, or TPU, ecosystem. TPUs are custom chips used by Google for AI workloads and are a key part of its AI infrastructure.
The warrant and Google's potential stake
The agreement also gives Google the option to become one of Marvell's largest shareholders. Under the deal, Google received a warrant to buy up to 58.97 million Marvell shares at $206.58 each. If fully exercised, the warrant would be worth about $12.18 billion, and a stake of that size would make Google Marvell's fifth-largest investor. Most of the warrant will become available only if Google meets agreed purchasing targets through fiscal 2033, meaning Google's potential stake is tied to how much business it gives the chipmaker over time.
AI infrastructure spending boom
The deal comes as Big Tech companies are sharply increasing spending on AI infrastructure. Large technology companies are expected to spend more than $700 billion on AI infrastructure this year, compared with about $400 billion last year. Demand for custom AI chips has been rising as companies look for cheaper and more specialised alternatives to Nvidia's graphics processors. Custom chips such as Google's TPUs are also seen as better suited for certain AI inference workloads, where trained AI models are used to deliver results.
Marvell's position and competitive landscape
For Marvell, the Google deal strengthens its position in the market for custom silicon and AI infrastructure components. The company has been trying to expand beyond traditional networking and storage chips into higher-growth areas linked to cloud computing and AI. The market reaction shows investors see the agreement as more than a normal supply deal. Google's warrant gives it a direct financial stake in Marvell's success, aligning incentives between the two companies as they collaborate on custom chip development.
Marvell faces competition from Broadcom, with whom Google has a long-term agreement to develop and supply custom AI chips and other components through 2031. Over the last decade, Google has largely worked with Broadcom on custom chips, and the two companies expanded their deal in April. Broadcom's stock fell about 5% following the announcement, suggesting investors see Marvell's gain as potentially coming at Broadcom's expense.