Marvell's Big Bet on AI Future

Marvell, a big name in semiconductors, just made a bold move. They're buying Celestial AI for a whopping $3. 25 billion. That price could even go up to $5. 5 billion if Celestial hits certain sales targets. This isn't just any purchase. It's a strategic play to boost Marvell's networking business. With Celestial's tech, Marvell aims to sell more chips to companies pouring billions into AI infrastructure. Marvell's stock has taken a hit this year, down 18%. Meanwhile, rivals like Broadcom are riding high on AI hype. This acquisition might be Marvell's way to catch up. Celestial is all about optical interconnects, or "photonic fabric. " These are crucial for linking up high-powered computers. Advanced AI systems need these connections to tie together dozens or even hundreds of chips. Right now, many AI chips use copper wires. But optical connections are faster and can handle more data. They're also more expensive, but the benefits seem to outweigh the costs. Marvell's CEO, Matt Murphy, sees this as a way to strengthen their tech leadership. It broadens their market and speeds up their plans to deliver top-notch connectivity for AI and cloud customers. The first use of Celestial's tech will be in systems based on "large XPUs. " These are custom AI chips made by companies investing heavily in AI. Marvell might even integrate Celestial's optical tech into these custom chips and related parts called switches. Amazon Web Services is on board with this move. They think it will speed up innovation for next-gen AI deployments. The deal is expected to close early next year. If Celestial hits $2 billion in cumulative revenue by the end of fiscal 2029, Marvell will pay the maximum amount. Marvell's shares rose 9% in extended trading. They reported better-than-expected earnings for the third quarter. They also expect data center revenue to jump 25% next year. The company reported 76 cents in adjusted earnings per share on $2. 08 billion in sales. This beat expectations of 73 cents on $2. 07 billion in sales. Marvell forecasts fourth-quarter revenue of $2. 2 billion, slightly higher than expected.