The Santa Clara chipmaker is betting that pairing its electrical connectivity chips with San Jose-based Lumentum’s lasers and optics will win the next phase of the AI data center buildout, but investors sent both stocks sharply lower.
Marvell Technology said Monday that it had agreed to acquire Lumentum, the San Jose maker of lasers and optical components, in an all-stock transaction that would combine two of the Bay Area’s fastest-growing suppliers to artificial intelligence data centers.
Under the agreement, announced by the companies, Lumentum stockholders would receive a fixed 4.5 Marvell shares for each Lumentum share. The companies put the implied enterprise value at $115 billion, or about $1,132 per Lumentum share, a premium of roughly 23.9 percent to each company’s closing price on Oct. 28, the last trading day before market speculation about a deal began. Marvell stockholders would own about 67 percent of the combined company and Lumentum stockholders about 33 percent.
Both boards approved the deal unanimously. The companies expect it to close in the first half of 2028, after stockholder votes at both companies and regulatory approvals.
The case for the deal
The companies argue that the copper wiring that has long connected chips inside data centers is reaching its physical limits as AI systems grow, and that the industry is moving toward light-based, or optical, connections that require electrical and optical parts to be designed together.
Marvell sells chips that move data across networks, network switches and custom processors for large cloud companies. Lumentum makes high-performance lasers, optical transceivers and optical circuit switches, and runs specialized manufacturing for compound semiconductors such as indium phosphide. The companies said the combination would expand their addressable market to $550 billion and yield more than $1 billion in annual cost savings, and that the deal would add to Marvell’s adjusted earnings per share in its first year after closing.
“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” Matt Murphy, Marvell’s chairman and chief executive, said in the announcement.
Michael Hurlston, Lumentum’s president and chief executive, said in the same release that the combination “enhances our ability to deliver next-generation solutions at scale.” Mr. Hurlston told CNBC the opportunity was “enormous.”
Mr. Murphy would remain chairman and chief executive of the combined company. Three Lumentum directors, including Mr. Hurlston, would join Marvell’s seven-member board.
A cool reception on Wall Street
Investors were less enthusiastic on the first day. Marvell shares fell 13 percent on Monday and Lumentum’s dropped nearly 19 percent, CNBC reported. Because the price is set in Marvell stock rather than cash, the value Lumentum holders ultimately receive will rise and fall with Marvell’s share price until the deal closes.
Both stocks had climbed steeply during the AI boom. Before Monday, Marvell’s shares had more than doubled over the past year and Lumentum’s had roughly quadrupled, according to CNBC.
Lumentum also reported quarterly results on Monday. For its fiscal first quarter, which ended Sept. 26, the company reported revenue of $1.26 billion, up 136.5 percent from a year earlier, and net income of $360.3 million. It forecast revenue of $1.575 billion to $1.625 billion for the current quarter. Marvell said its own revenue for the quarter ended Oct. 31 was in line with its earlier guidance.
Mr. Murphy also addressed questions about Nvidia, which has made large investments in both companies. Critics have argued that Nvidia’s stakes in suppliers and customers amount to circular financing of its own sales. Mr. Murphy told CNBC the deal was “a double down on supporting Nvidia, who is the ecosystem leader in this area,” and said bringing two key suppliers together “is going to be a big benefit for them.”
The acquisition is Marvell’s second major optical bet this year. It closed its purchase of Celestial AI, a start-up focused on optical interconnect technology, earlier in 2026.
The fine print
A filing Marvell made with the Securities and Exchange Commission on Monday lays out what could still stop the deal. The merger agreement, dated Nov. 1, requires approval from Lumentum stockholders and from Marvell stockholders, who must sign off on issuing the new shares and on an amendment to Marvell’s charter. It also requires clearance under the Hart-Scott-Rodino antitrust law and other regulatory approvals, and an effective registration statement for the new shares.
Either side can walk away if the deal has not closed by Nov. 1, 2027, a deadline that can be extended in steps to Aug. 1, 2028, if regulatory approvals are still pending.
The breakup fees are large. Marvell would owe Lumentum $5.8 billion in certain circumstances, including if Marvell’s board changes its recommendation to stockholders or Marvell abandons the deal for a better offer. Lumentum would owe Marvell $2.9 billion in corresponding circumstances. Marvell would also owe Lumentum $3.2 billion if the deal fails for regulatory reasons, a provision that puts a price on the antitrust risk Marvell is taking on.
What it means for the Bay Area
The deal would put two South Bay companies under one roof. Marvell’s main campus is in Santa Clara, and Lumentum is headquartered in San Jose with research, manufacturing and sales operations around the world.
The announcement did not say how the companies would reach the more than $1 billion in cost savings, or whether any of the savings would come from jobs or facilities in California. Those details, along with the companies’ full account of how the deal came together, are expected in the joint proxy statement the companies plan to file with the SEC.
The Inquirer sought comment on Monday from Marvell, through its investor relations office and its outside communications firm, FGS Global, and from Lumentum, through its media office, investor relations office and its outside communications firm, Joele Frank. Marvell did not respond. Lumentum did not provide comment by publication.
Wendell Yamashiro covers business, technology, labor, trade and the Bay Area economy for Trade and Commerce. More from Wendell Yamashiro
