Chipmaker Marvell Technology is making a multibillion-dollar strategic acquisition to position itself at the forefront of AI infrastructure development.
On Tuesday, Marvell announced a $3.25 billion cash-and-stock deal to acquire semiconductor startup Celestial AI, with the total potential value reaching $5.5 billion if certain revenue milestones are achieved. The acquisition centers on photonic interconnect technology, seen as critical for overcoming AI computing bottlenecks as large language models grow increasingly complex.
Marvell aims to establish early leadership in the transition from electrical to optical connections, strengthening its competitive position in AI data center connectivity against rivals like NVIDIA and Broadcom. The deal received a significant endorsement through Marvell's issuance of stock warrants to key customer Amazon, linking future product purchases to the acquisition.
The announcement, coupled with strong earnings and optimistic guidance, sent Marvell shares soaring 13% in after-hours trading. The company forecasts 25% growth in its data center business next fiscal year, driven by AI demand.
**A $5.5 Billion Strategic Gamble** The transaction includes $1 billion in cash and $2.25 billion in Marvell stock (27.2 million shares), with additional payments contingent on Celestial AI achieving $2 billion cumulative revenue by FY2029. Expected to close in Q1 2026, the deal expands Marvell's "potential market in large-scale connectivity" and accelerates its roadmap for comprehensive AI/cloud connectivity solutions, according to CEO Matt Murphy.
Marvell projects Celestial AI will contribute meaningfully from H2 FY2028, reaching $500 million annualized revenue by Q4 FY2028 and doubling to $1 billion by Q4 FY2029.
**Photonic Interconnects: The "Nervous System" of AI Data Centers** Founded in 2020, Celestial AI specializes in photonic hardware through its "Photonic Fabric" technology, which uses light instead of electricity for chip-to-chip communication. This approach promises 25x greater bandwidth with lower latency and power consumption compared to traditional copper interconnects—critical for next-gen computing as AI models demand exponentially more processing power.
Celestial AI's platform sets "new standards for bandwidth, latency, power efficiency and total cost of ownership," according to CEO David Lazovsky. The startup counts AMD Ventures and BlackRock among its investors, with industry veterans like former Intel CEO Lip-Bu Tan on its board.
**Taking on NVIDIA with Amazon's Backing** The acquisition positions Marvell as a "silicon photonics powerhouse" competing directly with NVIDIA and Broadcom in high-end connectivity—a market Marvell estimates at $10 billion. CEO Murphy predicts large cloud providers will begin mass photonics deployment by 2027-2028.
Notably, Marvell secured Amazon's commitment through stock warrants tied to future photonic product purchases, allowing Amazon to buy up to $90 million in Marvell shares at $87 through 2030. AWS VP Dave Brown called the deal an accelerator for "optical scaling innovations in next-gen AI deployments."
**Strong Earnings Fuel Optimism** Prior to the acquisition, Marvell's stock had underperformed AI-focused peers in 2025 with a 15% decline. However, the company's Q3 results beat expectations with $0.76 EPS and $2.08 billion revenue, while Q4 guidance of $2.2 billion surpassed consensus estimates of $2.18 billion.
Marvell's bullish outlook forecasts $10 billion annual revenue next fiscal year, with 25% growth in data center revenue and 20% growth in custom chip solutions.