Marvell Technology is partnering with Google to develop custom AI chips, offering Google the right to acquire a significant stake in the company. This deal is part of a growing trend where major tech companies are investing in suppliers to power their artificial intelligence initiatives. Marvell's stock surged nearly 10% on the news, reflecting investor confidence in the long-term revenue potential, which could reach $120 billion through fiscal year 2033 if Google meets purchasing targets.
The agreement gives Google a warrant to purchase up to 58.97 million Marvell shares at an exercise price of $206.58 per share. If fully exercised, this option is valued at approximately $12.18 billion and would make Google the fifth-largest investor in Marvell. The deal encompasses a wide range of technologies crucial for Google's Tensor Processing Units (TPUs), including processors for running AI models, managing data storage, and facilitating network communication.
This partnership also signals a shift in Google's custom chip strategy. Previously, Broadcom was Google's primary partner for TPUs. While analysts like Morningstar's William Kerwin believe this deal represents a "growing pie at Google for new sources" rather than a direct displacement of Broadcom, Broadcom's shares dropped over 5% following the announcement. The move highlights Google's increasing focus on in-house chip development to find more cost-effective alternatives to expensive GPUs from companies like Nvidia and to optimize for AI inference tasks.
