Chip Maker Marvell Agrees to Buy Lumentum in $80 Billion Deal

Artificial-intelligence chip maker Marvell MRVL -10.05%decrease; down pointing triangle agreed to buy data-center-optics maker Lumentum LITE -8.57%decrease; down pointing triangle in an all-stock deal worth roughly $80 billion.

The deal will combine two of the fastest-growing enablers of AI.

Marvell designs custom AI chips and other technology that connects processors and moves data around data centers. Buying Lumentum would expand its offerings in technology that uses light to move data between chips and servers.

Nvidia is a strategic investor in both companies.

Under the terms of the agreement, Lumentum stockholders will receive 4.5 shares of Marvell common stock for each share of Lumentum common stock they own, the companies said Monday. Including debt, the deal is valued at about $115 billion.

Lumentum makes lasers, chips and optical interconnectivity hardware that are incorporated into data-center servers. A key player in the once-obscure field of photonics, Lumentum and other companies like it produce technology that seeks to help computers transmit data between semiconductors faster than can be done over traditional copper wire connections.

Lumentum has a market value of around $76 billion, while Marvell’s is about $172 billion.

Marvell’s data-center segment made up less than 10% of its revenue in 2016, but now comprises the majority and is its leading growth engine. Chief Executive Matt Murphy has said Marvell “bet the farm” to build up its data-center business.

In early March, Nvidia announced a multiyear purchase commitment for Lumentum’s advanced laser components. As part of that deal, Nvidia said it would invest $2 billion in Lumentum to support research and development, as well as the company’s manufacturing capabilities in the U.S.

Later that month, Nvidia invested $2 billion in Marvell as part of a strategic partnership aimed at helping companies that develop custom AI chips to connect more easily to Nvidia systems.

If a deal is completed, Marvell’s technology could benefit hardware that competes with Nvidia. Marvell is best-known for helping develop custom AI chips for Amazon Web Services. In August, Marvell disclosed an expanded commercial partnership with Google that gives the tech giant rights to buy Marvell shares.

“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” Murphy said, adding that the deal will help to shape the next era of AI connectivity.