Marvell's Big Bet on AI Future
Marvell, a leading name in semiconductors, has just made a significant strategic move. They are acquiring Celestial AI for a staggering $3.25 billion, with the potential to reach $5.5 billion if Celestial meets certain sales targets.
A Strategic Play to Boost Networking Business
This acquisition is not just any purchase—it's a calculated move to strengthen Marvell's networking business. With Celestial's cutting-edge technology, Marvell aims to sell more chips to companies investing heavily in AI infrastructure.
Marvell's Stock Struggles and the Need to Catch Up
Marvell's stock has taken a hit this year, down 18%. Meanwhile, rivals like Broadcom are thriving on AI hype. This acquisition could be Marvell's way to catch up.
Celestial's Specialty: Optical Interconnects
Celestial specializes in optical interconnects, also known as "photonic fabric." These are crucial for linking high-powered computers. Advanced AI systems rely on these connections to tie together dozens or even hundreds of chips.
The Shift from Copper to Optical Connections
Currently, many AI chips use copper wires. However, optical connections are faster and can handle more data. Although they are more expensive, the benefits seem to outweigh the costs.
Strengthening Tech Leadership
Marvell's CEO, Matt Murphy, sees this acquisition as a way to strengthen their tech leadership. It broadens their market and accelerates their plans to deliver top-notch connectivity for AI and cloud customers.
First Use in Large XPUs
The first application of Celestial's tech will be in systems based on "large XPUs." These are custom AI chips made by companies investing heavily in AI. Marvell might even integrate Celestial's optical tech into these custom chips and related parts called switches.
Amazon Web Services' Support
Amazon Web Services (AWS) is on board with this move. They believe it will speed up innovation for next-gen AI deployments.
Deal Expected to Close Early Next Year
The deal is expected to close early next year. If Celestial hits $2 billion in cumulative revenue by the end of fiscal 2029, Marvell will pay the maximum amount.
Marvell's Stock Rises on Better-Than-Expected Earnings
Marvell's shares rose 9% in extended trading. They reported better-than-expected earnings for the third quarter. They also expect data center revenue to jump 25% next year.
Financial Highlights
- Adjusted earnings per share: 76 cents (vs. expected 73 cents)
- Sales: $2.08 billion (vs. expected $2.07 billion)
- Fourth-quarter revenue forecast: $2.2 billion (slightly higher than expected)
