Marvell Gives Google Right to Buy Up to $12 Billion in Stock

Marvell Technology Inc. and Alphabet Inc.’s Google announced an expanded chip-development partnership, including a warrant from Marvell allowing the search giant to buy as much as $12.2 billion in shares.

Google may purchase up to nearly 59 million Marvell shares at a price of $206.58 apiece, Marvell said Wednesday in a regulatory filing. Nearly 1.4 million of the shares vest in the first year of the deal, after which they will vest in 240 tranches until the end of Marvell’s fiscal 2033, with a tranche for each $500 million in revenue from custom chips sold to Google.

The custom chips will contribute to Google’s tensor processing unit, or TPU, ecosystem and include artificial intelligence inference accelerators, storage controllers, network interface controllers, memory interface controllers and near-memory compute, according to the statement. A TPU is a specialized chip designed to efficiently perform AI calculations.

Shares of Marvell jumped as much as 14% to $245.49 at the market open in New York. Alphabet’s stock was little changed.

Companies like Google that are investing heavily in AI infrastructure are looking for ways to lower the cost of chips, including Nvidia Corp.’s AI accelerators that are considered the best in the industry. Other hyperscalers including Amazon.com Inc. are also developing their own semiconductors for inference, or running AI models.

Google’s TPUs have become a key attraction for customers as it makes the chips available for Google Cloud customers in their own data centers.

Alphabet is expected to generate about $3 billion of revenue from TPU-related infrastructure this year and $25 billion in 2027, Citizens analyst Andrew Boone said earlier this year.

As the business grows, Google has sought more custom chips. In April, it signed a similar agreement with Broadcom Inc. to develop and supply custom TPUs. Broadcom shares fell 2.4% at the open on the news that another major chipmaker will be partnering with Google on TPUs.