Marvell shares jump 12% as Google eyes $12.2 billion stake in AI chip deal

Marvell Technology shares jumped more than 12% in premarket trading on Wednesday after the chipmaker expanded its partnership with Google to develop custom semiconductors for artificial intelligence applications. As part of the agreement, Google received a warrant that could allow it to buy up to $12.2 billion worth of Marvell shares.

The deal gives Google the potential to become one of Marvell’s largest investors while deepening cooperation between the companies as demand for custom AI chips accelerates.

Google shares were little changed before the market opened, while Broadcom, its existing custom chip partner, fell following the announcement.

Marvell and Google expand AI chip partnership

Marvell said in a regulatory filing that the companies had expanded their partnership on July 29 to cover a broad range of custom semiconductor programmes linked to Google’s Tensor Processing Unit (TPU) ecosystem.

The collaboration will include AI inference accelerators, storage controllers, network interface controllers, memory interface controllers and near-memory computing technology.

“The expanded partnership spans a comprehensive range of custom silicon programs that attach to the TPU ecosystem, including AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near-memory compute,” Marvell said in the filing.

The companies are seeking to develop components that can support Google’s growing AI infrastructure, particularly systems designed to run trained AI models, known as inference.

Google could buy $12.2 billion of Marvell shares

Under the agreement, Marvell issued Google a warrant on August 18 to purchase up to 58.97 million Marvell shares at an exercise price of $206.58 per share.

If Google exercises the entire warrant, the shares would be worth approximately $12.18 billion, according to Reuters calculations. A stake of that size would make Google Marvell’s fifth-largest shareholder based on LSEG data.

However, the majority of the warrant is tied to future purchases from Marvell. About 1.36 million shares will vest through equal quarterly instalments during the first year of the agreement.

The remaining shares will vest through fiscal 2033 based on discretionary purchases by Google and its affiliates. One tranche will vest for every $500 million in revenue generated from Marvell’s custom products under the partnership.

Why Google is investing in custom AI chips

The agreement comes as major technology companies pour unprecedented amounts of money into AI infrastructure and seek alternatives to expensive general-purpose AI processors.

Google has developed its own TPUs to support its AI workloads, while other major technology companies are also building custom chips designed for specific applications. Inference, which involves running already-trained AI models, has become a particularly important area as demand for AI services grows.

The push for custom silicon could help technology companies control costs and optimise hardware for their specific AI workloads, rather than relying exclusively on Nvidia’s widely used AI accelerators.

Broadcom shares fall after Marvell deal

Marvell’s expanded relationship with Google increases competition with Broadcom, which has been a key supplier and development partner for Google’s custom TPU chips.

Broadcom shares fell more than 2% in premarket trading after the announcement, while Marvell gained more than 11%. The move reflected investor attention on the changing landscape for custom AI semiconductors and Google’s expanding requirements for specialised hardware.

Broadcom has a long-term agreement with Google to develop and supply future generations of custom AI chips and other components for the company’s next-generation AI racks through 2031.

The Marvell agreement comes as major technology companies are expected to spend more than $700 billion on AI infrastructure this year, sharply higher than the roughly $400 billion spent last year.

(With inputs from agencies)