Marvell Stock Surges as Company Acquires Celestial AI for $3.25B to Boost Photonics & AI Infrastructure

Marvell’s $3.25 billion purchase of Celestial AI was, for better or worse, a corporate makeover. The tech company was recently moving slowly with a lot of competition coming from the giants of the industry and it would take nothing less than going so big to prove a point.

Marvell Technology’s stock price, which had been stagnant for quite some time, increased 9.3% on Wednesday. It reached its highest point in nine months after the announcement of this deal.

The competition in AI chips and networking solutions has been very tough, and if the increase sustains, it will uplift Marvell’s market value by more than $6.3 billion, which will add confidence that is really needed after quite a difficult year. 

However, even after the Wednesday increase, the price of Marvell’s stock has been down by about 16% year to date, before the announcement. Therefore, the deal is an effort to turn around the company’s fortunes, hence the boldness of this move is demonstrative.

Strategic Bet on Next-Gen AI Infrastructure

The acquisition of Celestial AI means that Marvell is right in the middle of the race for photonic-powered data centers, which is a technology that will support the growing demand of the generative AI era. While electrical technology consumes much energy, the use of photonic fabric tech that uses light to connect AI chips and memory, allows for the faster, cooler, and power-efficient systems. 

They already can absorb the power through the heat generated by the chips’ device. As AI workloads are on the rise, this is exactly what the hyperscalers like Amazon, Microsoft, and Google need.

With the acquisition of Celestial AI, Marvell is already being seen as a strong competitor alongside Broadcom and Nvidia over the next round of AI infrastructure hardware.

Analyst TD Cowen summed up the response to this and said,

“In our view, Celestial AI, with blessing from Amazon, bolsters Marvell’s CPO (co-packaged optics) technology for custom XPUs and scale-up switching, making Marvell a stronger contender”.

A Boost from Amazon & a Big Revenue Pipeline

In the deal, Marvell granted a warrant to Amazon, giving the company the right to acquire Marvell shares that are linked to its purchases of photonic fabric products by the year 2030. This is a clear indication of Amazon’s long term AI capacity building efforts through advanced means.

As per the CEO Matt Murphy; Marvell’s next-generation products for photonics-related infrastructure will be powered by Celestial’s technology. The company expects this product line to create a $10 billion open market for it. Celestial is expected to give the company $500 million annualized revenue by the end of fiscal year 2028, which will grow to $1 billion by 2029. In the next fiscal year, Marvell expects to make $10 billion mostly from a 25% increase in sales in the data center market and a 20% increase in the custom chip market.

Competitive Position in the AI Race

Marvell’s stock has increased recently, but the company is still cheaper than its competitors. LSEG data shows that its 12-month forward P/E ratio of 27.25 is much lower than Broadcom’s 38.39. 

Marvell is now entering the AI infrastructure race with a renewed strength due to its product roadmap and growing data centers, along with its new photon capability, and the investors are taking notice.

Marvell’s Celestial leap is less about catching up and more about refusing to fall behind. The deal places the company firmly among hyperscalers who are rewriting the rules of compute architecture. AI application demands are skyrocketing and power efficient data-center designs are becoming a must-have, so photonics is not just another trend, it’s the door to staying relevant.

Marvell has a lot to prove still, and the competition from Nvidia and Broadcom is ruthless. But for the first time in a very long time, the company seems to be taking a much more aggressive stance instead of having to defend itself. 

If the execution is on the same level with the ambition, this acquisition could be the turning point, where Marvell can evolve from being a supportive character to becoming a core player in AI’s next chapter.