New Delhi, India, December 3- Marvell Technology will buy Celestial AI for $3.25 billion, marking a major step in its strategy to dominate the AI chip market. The deal includes $1 billion in cash and 27.2 million Marvell shares worth $2.25 billion. It is expected to close in the first quarter of 2026.
Marvell’s stock surged 13% in after-hours trading after the announcement. This sharp rise comes despite the company’s shares being down more than 15% earlier this year due to growing competition and investor concerns about an AI bubble.
The acquisition gives Marvell access to Celestial AI’s photonics technology, which uses light instead of electrical signals to connect chips. This breakthrough promises faster data transfer and lower energy use, making it essential for next-generation data centers. Marvell CEO Matt Murphy said the company will become a “silicon photonics powerhouse” once the deal is complete.
Photonics could transform large-scale cloud operations. Murphy expects big cloud providers to start installing photonics technology by 2027 or 2028, with widespread adoption following soon after. This technology will be integrated into Marvell’s next-generation infrastructure products, opening a $10 billion market opportunity.
Marvell also issued a warrant to Amazon, allowing it to buy up to $90 million worth of Marvell stock based on purchases of photonic products through 2030. The exercise price is about $87 per share. This agreement strengthens Marvell’s ties with one of the largest cloud providers and signals confidence in photonics technology.
The company forecasts $10 billion in total revenue for its next fiscal year, including a 25% increase in data center revenue. Custom chip revenue is expected to grow 20%, driven by demand from cloud giants such as Amazon and Microsoft. For the current quarter, Marvell projects revenue of around $2.2 billion, slightly above Wall Street estimates. Third-quarter revenue rose nearly 37% to $2.07 billion, matching analyst expectations.
Marvell expects Celestial AI to start contributing meaningful revenue in the second half of fiscal 2028. It anticipates reaching $500 million annually by the end of that year and doubling to $1 billion by late 2029. These projections highlight the long-term value Marvell sees in photonics technology.
Industry analysts say the acquisition positions Marvell to compete more aggressively with rivals like Broadcom and Nvidia. Both companies are racing to develop faster, more efficient chips for AI workloads. The generative AI boom has accelerated innovation across the semiconductor industry, pushing firms to design hardware that can handle massive models without overwhelming power grids.
For Marvell, this deal represents more than an acquisition, it marks a strategic bet on the future of computing. By combining Celestial AI’s photonics expertise with its own custom chip capabilities, Marvell aims to lead the next wave of data center technology. The company believes photonics will become a standard feature in large-scale AI deployments, reducing energy costs and improving performance.
Investors welcomed the news, as reflected in the sharp rise in Marvell’s stock price. The company’s bullish outlook for 2026 adds to the optimism. With AI driving demand for advanced chips, Marvell is positioning itself as a key player in a market that could reshape global technology infrastructure.
The deal also underscores a broader trend in the semiconductor industry. Companies are investing heavily in technologies that improve speed and efficiency while reducing power consumption. As AI models grow larger and more complex, these innovations will be critical for sustaining growth without straining energy resources.
Marvell’s move signals confidence in both the technology and the market. If photonics delivers on its promise, Marvell could secure a leading role in the next era of cloud computing. For now, the company is betting big and investors are paying attention.
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