Marvell nears a deal to buy Nvidia-backed Lumentum, Bloomberg reports

Chipmaker Marvell Technology is in advanced talks to buy Lumentum, which makes the lasers that move data between AI chips. Marvell would likely pay in shares, and the companies could announce a deal as soon as next week, according to Bloomberg.

Ryan Gould, Michelle F. Davis and David Carnevali reported the talks for Bloomberg on Wednesday, citing people familiar with the matter. Valida Pau separately reported for The Information that the companies have been in talks, citing one person. TNW has not independently verified the reports.

Lumentum is worth about $85bn and Marvell about $196bn, Bloomberg reported. Bloomberg could not learn the terms. A deal would be one of the largest ever in the technology industry, according to Bloomberg.

Not agreed yet

The Marvell Lumentum deal is not final. The companies have not reached an agreement, and the talks could still end without one, the people told Bloomberg. The timing could also change. Bloomberg said it could not reach Marvell or Lumentum for comment.

Lumentum shares rose in extended trading on Wednesday after the report, Britney Nguyen reported for MarketWatch. On Thursday, Marvell fell as much as 14% in New York and Lumentum rose as much as 7%, according to Bloomberg. The Nasdaq 100 also fell, after big tech results renewed doubts about AI spending.

Why lasers matter

Lumentum makes lasers and other optical parts that send large amounts of data at high speed. AI data centres link growing clusters of processors. More of that traffic now moves over optical links instead of copper wires.

Lumentum chief executive Michael Hurlston said this month that its optical parts are sold out through early 2029, Bloomberg reported. He said the company will not be able to meet about 70% of demand for some products next year. Lumentum plans to invest at least $350m in Japan to make more indium phosphide components. In September, IQE’s chief executive warned about the supply of that material.

Marvell already buys lasers from Lumentum. It makes custom AI and networking chips and works with Amazon Web Services and Microsoft on their own AI chips. In August, it agreed a chip deal with Google. Earlier this year it bought Celestial AI, which builds photonic technology for moving data between processors.

Nvidia took a $2bn stake in Lumentum earlier this year, in a deal that included work together on photonics, Bloomberg reported. Nvidia also holds about $99bn in shares of companies that buy its chips.

What analysts said

The deal “makes strategic sense given the highly complementary product portfolios,” RBC Capital Markets analysts wrote, according to Bloomberg.

The RBC analysts said the case is strongest if Marvell sells Lumentum’s pluggable module business. Raymond James analysts wrote that an all-share deal avoids interest costs, so it would dilute earnings less. Marvell shareholders would give up more ownership, though.