One of the biggest M&A deals: Why is Marvell buying Lumentum?

​Marvell Technology is acquiring Lumentum for $115 billion. It is one of the largest deals in the history of the technology industry. But how could the merger of the two companies affect the market for artificial intelligence hardware?

How the Marvell-Lumentum deal is structured

On November 2, U.S.-based Marvell Technology agreed to acquire Lumentum for $115 billion. By value, it is the second-largest deal in tech industry history, behind the merger of SpaceX and xAI. The acquisition will be paid for entirely in Marvell shares, with existing Lumentum shareholders receiving approximately one-third of the combined company.

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Despite the similar name, Marvell Technology has no connection to Marvel, which is known for its superhero movies. The company develops semiconductors for data centers, computer networks and artificial intelligence systems. Its customers include Amazon and Google, which use Marvell's custom chips in their infrastructure. Over the past year, the company generated approximately $8.2 billion in revenue, while its market capitalization exceeded $220 billion before the deal was announced.

Lumentum manufactures optical equipment that enables data transmission using light. Its products include lasers, optical transceivers and other components for high-speed networks. These technologies are particularly important in data centers, where thousands of processors must constantly exchange enormous amounts of information. Lumentum's annual revenue is approximately $3 billion.

Marvell CEO Matt Murphy will lead the combined company, while three Lumentum representatives will join its board of directors. According to Marvell's estimates, the combined business could achieve annual revenue exceeding $21 billion. The transaction is expected to close in the first half of 2028, subject to regulatory and shareholder approvals.

What does Nvidia have to do with it?

Several months before the deal was announced, Nvidia invested $2 billion each in Marvell and Lumentum. Moreover, before finalizing the agreement, executives from both companies held a phone call with Nvidia CEO Jensen Huang to seek his opinion. According to Bloomberg sources, Huang supported the merger, although Nvidia itself has not publicly commented on the matter.

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Nvidia's interest is explained by the requirements of modern data centers. Training large artificial intelligence models involves thousands of powerful processors that must constantly exchange information. Traditional copper connections can no longer always handle the growing volumes of data. As a result, companies are increasingly turning to optical technologies, which use light to transmit information at high speeds while consuming less energy.

The merger will allow the two companies to develop integrated solutions in which electronic and optical components are designed from the outset to work together. For Nvidia, this could mean faster access to the equipment needed to build new AI data centers. In an interview with CNBC, Marvell CEO Matt Murphy explicitly stated that the deal would strengthen the company's support for Nvidia.

At the same time, Marvell aims to strengthen its position not only within Nvidia's ecosystem but also in its competition with Broadcom, one of the leading manufacturers of custom AI chips. In August, Marvell signed an agreement with Google to supply chips worth up to $120 billion through 2033. The company had previously acquired optical technology developer Celestial AI for $3.5 billion. The Lumentum acquisition will now allow it to expand production of components needed to connect thousands of processors into large computing systems.

Why did the deal scare investors?

Investors responded to the deal announcement with a major sell-off in both companies' shares. By the close of trading on November 2, Marvell shares had fallen 12.7% to $171, while Lumentum shares dropped 18.6% to $684. Both companies have lost more than a third of their market value over the past month, although their shares are still up significantly since the beginning of 2026.

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The main concern is the high purchase price. According to Reuters, Marvell is paying roughly twice the valuation that comparable companies typically command relative to their earnings. Axel Rudolph, chief technical analyst at IG Group, noted that investors are questioning whether the price is justified and whether Marvell is taking on too much risk.

These risks are particularly significant amid rising AI spending by technology giants. Amazon, Google and other companies are investing tens of billions of dollars in building data centers, purchasing processors and developing energy infrastructure. However, these investments increasingly require borrowed funds, while their future returns remain uncertain. If major customers begin cutting spending, demand for Marvell and Lumentum equipment could fall short of current expectations.

Another concern is the growing dependence of hardware manufacturers on Nvidia. In 2026, the company invested billions of dollars in its partners while remaining the industry's leading supplier of AI processors. This model has raised concerns among investors, as some of the money circulates within the same technology ecosystem, whose stability depends on continued large-scale investment in artificial intelligence.

There is also a risk that the deal may not go through. Marvell and Lumentum must obtain regulatory clearance and shareholder approval. Under the agreement, if regulators block the merger, Marvell will have to pay Lumentum $3.2 billion. If Marvell withdraws from the deal under certain contractual circumstances, the termination fee could reach $5.8 billion. In addition, the companies will need to integrate their manufacturing facilities, research divisions and supply chains while maintaining relationships with their largest customers.

Will the bet on AI pay off?

Marvell is acquiring Lumentum for more than just business expansion. The company aims to secure a key position in the AI data center equipment market, where data transmission speeds are becoming just as important as the processing power of the chips themselves. Instead of purchasing individual components, major technology companies will be able to order more comprehensive solutions from a single supplier. For Marvell, this creates an opportunity to increase its share of a rapidly growing market and secure new contracts.

However, this opportunity comes at an enormous price, even before it becomes clear how profitable today's AI investments will be. If demand for AI infrastructure continues to grow, Marvell may be able to justify the high acquisition cost. But if technology giants cut spending, the company risks being left with an expensive acquisition that fails to deliver the expected returns. The deal will therefore become one of the biggest tests of how sustainable the current artificial intelligence boom really is.