Marvell Technology is in advanced talks to buy Lumentum Holdings, the data center optics maker, Bloomberg reported on Wednesday, citing people familiar with the matter. A deal could be announced as soon as next week, the people said. No price or terms were reported.
The size is the headline. Bloomberg put Lumentum's market value at about $83 billion and Marvell's at about $221 billion. That makes the target worth more than a third of the buyer. If completed, it would rank among the year's largest semiconductor sector combinations, Investing.com noted. The same story called the optical hardware Lumentum makes a critical bottleneck in generative AI clusters.
What the report says
- Marvell is in advanced talks to buy Lumentum, according to Bloomberg.
- An announcement could come as soon as next week, the people told Bloomberg. They asked not to be named because the talks are private.
- A final deal has not been reached, and details could change, Yahoo Finance noted in its summary of the report.
- A source familiar with the matter told Reuters the same, including the possible timing. Marvell and Lumentum did not immediately respond to Reuters requests for comment, per the Reuters story carried by MarketScreener.
Shares moved after the report. Lumentum rose about 9% in extended trading, while Marvell fell more than 8%, Reuters reported.
What each company does
Marvell is a fabless chip designer. It does two main things for AI data centers, as Yahoo Finance summarized after its investor day: it helps large cloud customers, including Amazon and Alphabet, design and build custom AI chips, and it makes the optical and networking chips that move data within and between data center racks.
Lumentum makes lasers, optical components and networking systems used in cloud and AI data centers. Its indium phosphide technology is in particularly high demand, and CEO Michael Hurlston has said the company is essentially sold out of certain products into 2029, according to Yahoo Finance.
In short, Marvell makes optical and networking chips, and Lumentum makes the lasers and optical components.
Why optics matters for AI clusters
Copper interconnects are more limited in capacity, and optical components can help ease bottlenecks in AI clusters by replacing them, Yahoo Finance wrote. NVIDIA said in March that optical interconnect technology is critical for the continued scaling of AI factories. Startups are working on the laser side too; see our story on Quintessent's comb lasers for AI clusters.
Money has followed. In March, NVIDIA announced a $2 billion investment in Lumentum as part of a multiyear, nonexclusive agreement that includes a multibillion-dollar purchase commitment and future capacity access rights for advanced laser components. NVIDIA said the money supports R&D, capacity and a new U.S. fab. Lumentum's filing shows NVIDIA bought 2,876,415 shares of convertible preferred stock at $695.31 each. NVIDIA invested the same $2 billion in rival Coherent on the same day, Reuters reported.
That NVIDIA stake is one detail to watch. Under the filing, the preferred shares vote with the common stock on an as-converted basis, except in director elections. They convert one for one into common stock at NVIDIA's option once the Hart-Scott-Rodino antitrust waiting period ends, or automatically just before NVIDIA sells them to Lumentum or a non-affiliate. NVIDIA is also a Lumentum customer, with a purchase commitment. Marvell's custom chip business has become a major growth engine as tech companies develop in-house AI processors to reduce reliance on NVIDIA chips, per Reuters.
Marvell's optics push so far
This would not be Marvell's first optics deal this year. In February, Marvell completed its purchase of Celestial AI, which makes Photonic Fabric optical interconnect technology for scale-up connectivity inside AI systems. Marvell issued about 24.6 million shares at closing and may pay up to $2.25 billion more in stock if Celestial hits revenue milestones through fiscal 2029, according to its filing.
At its October 6 investor day, Marvell raised its fiscal 2028 revenue goal to $20 billion from the $18 billion it gave in August, and attributed the extra $2 billion to data center connectivity products, including interconnect scale-up optics and switching. It also set a fiscal 2031 revenue target of $70 billion to $90 billion. Marvell now projects $12 billion in custom chip revenue in fiscal 2029, up from a prior target of $10 billion, Reuters reported.
Lumentum's products sit on the connectivity side of that plan. Investing.com wrote that a purchase would give Marvell direct ownership of optical technology it now buys from outside suppliers.
The open questions
Money is the first one. Marvell had cash and cash equivalents of about $3.92 billion as of its latest quarter, and Bernstein analysts said an acquisition of that size would likely require additional financing, according to Reuters.
Integration is the second. Bernstein also said a deal could present integration challenges. Marvell is a fabless chip designer, while Lumentum is building a new U.S. fab, per NVIDIA's March release.
Regulators are the third. Investing.com pointed to potential regulatory scrutiny as one reason for the market's caution, alongside valuation and execution.
Why it matters
NVIDIA chose to invest in optics suppliers and buy capacity. Marvell, if the reports hold, would own one outright.
No final deal has been reached. If one is announced, check the price, how it is funded and how NVIDIA's preferred stake is treated.
Sources
- Bloomberg: Marvell Is Said to Near Megadeal for Lumentum In AI Push
- Bloomberg Law copy of the Bloomberg report
- Reuters via MarketScreener: Marvell in advanced talks to buy Lumentum
- Investing.com: Marvell nears deal for optical supplier Lumentum
- Yahoo Finance: Marvell's potential Lumentum deal sends LITE surging
- NVIDIA: Strategic partnership with Lumentum
- Lumentum 8-K on the NVIDIA preferred stock
- Reuters: Nvidia to invest $2 billion each in Lumentum, Coherent
- Coherent: NVIDIA and Coherent announce strategic partnership
- Marvell: Completes acquisition of Celestial AI
- Marvell 8-K/A on the Celestial AI closing
- Yahoo Finance: Marvell raises fiscal 2031 revenue target at investor day
- Reuters via CNA: Marvell raises 2028 revenue forecast
