Marvell Technology has announced that it will help the tech giant Google build a custom AI chip. As part of the deal, the search giant will have an option to buy up to $12.18 billion worth of Marvell shares. The agreement sent Marvell stock nearly 8% higher. It could also help the company generate about $120 billion in revenue through fiscal 2033 if Google meets targets tied to the option.
Google turns to Marvell for custom AI chip development
Under the agreement, Google gets an option to purchase 58.97 million Marvell shares at $206.58 each. If it exercises the warrant, the stake would be worth $12.18 billion and make Google Marvell’s fifth-largest investor. The deal covers technologies that will help Google build its Tensor chipset. Further, Marvell will also help the tech giant in the development of processors that run AI models, manage data storage, and move information across networks.
In its official statement, Marvell said the deal could help it generate $120 billion in revenue through fiscal 2033. However, the revenue largely depends on Google’s performance attached to the investment option.
Investors react positively to the deal
Investors viewed the agreement as a major endorsement for Marvell from one of the world’s leading cloud providers. Reacting to the deal, the company’s share jumped over 8%. On the other hand, its rival Broadcom’s share dropped more than 5%. Alphabet’s share didn’t react much and remained stable.
Morningstar analyst William Kerwin described the deal as a significant win for Marvell. He also characterized it as additional business within Google’s growing AI investment. Demand for custom chips such as Google’s TPUs has increased as technology companies seek alternatives to Nvidia’s expensive graphics processors and hardware.
A recent overhaul of Google’s AI division also shifted influence toward executives with closer ties to Google Cloud. The company is focusing more and more on custom chips and infrastructure. The development reflects a broader push by major technology companies to control more of the hardware underpinning their AI systems.
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