Marvell Technology buys Celestial AI in $3.25 billion deal, shares jump nearly 8% — Inside the acquisition

Marvell Technology is set to acquire artificial intelligence startup Celestial AI in a deal worth $3.25 billion, the chipmaker said on Tuesday.

The news came as Marvell announced its third quarter results for the current financial year, and gave bullish forecast for its next fiscal year.

The acquisition of Celestial AI is part of the company's strategy to capture more of the runaway spending on artificial intelligence computing.

Shares of Marvell Technology were up by 8.73% to $101 apiece at extended trading, according to MarketWatch. Marvell Technology stock price was $92.89 at Tuesday's close.

Marvell-Celestial AI deal: What's inside?

The $3.25 billion Celestial AI acquisition of Marvell includes a $1 billion cash payment, and Marvell shares valued at $2.25 billion, the chipmaker said in its statement. Celestial AI will receive 27.2 million shares of Marvell common stock.

Celestial AI, a Santa Clara, California-based startup founded in 2020, offers a technology called photonic fabric that connects components within AI infrastructure.

The Celestial deal would allow Marvell to tap into the startup's work on photonics, which uses light rather than electrical signals to create connections between AI chips and memory chips, an area in which it competes with Broadcom and the world's most valuable company, Nvidia.

Marvell CEO Matt Murphy told Reuters that the Celestial AI technology will be used in Marvell's next-generation photonics-related infrastructure products, which will contribute to a new market for the company at the tune of about $10 billion.

“We’re going to have a silicon photonics powerhouse at Marvell when this is all done,” he said.

Marvell said the Celestial acquisition could bring in meaningful revenue contributions beginning in the second half of fiscal 2028. This can reach around $500 million in annualised run rate in the fourth quarter of fiscal 2028 and doubling to a run rate of $1 billion by the fourth quarter of fiscal 2029.

The deal is expected to close in the first quarter of calendar year 2026.

Celestial AI, a startup that closed a $255 million funding round in August, was backed by Fidelity Management & Research Co., BlackRock Inc. and Advanced Micro Devices Inc. Intel Corp. Chief Executive Officer Lip-Bu Tan also was an investor, and he joined the company’s board earlier this year.

Marvell has tried to position itself to benefit from the AI spending boom. However, the company has seen mixed success. The deal with Celestial will determine a significant portion of the company's future in AI.