Marvell Technology shares fell more than 3% on Monday after the chipmaker announced a $115 billion deal to acquire optical components maker Lumentum. Lumentum shares also fell after the announcement.
The $115 billion deal could become the largest merger between two publicly traded companies on record. The agreement is expected to give Marvell a stronger position in the fast-growing artificial intelligence (AI) infrastructure market, according to the companies' announcement.
The deal is expected to increase the combined company's total addressable market to $550 billion. This means the two companies will have access to a much larger market for their products and services, according to Yahoo Finance.
Marvell-Lumentum deal expands AI market to $550 billion
Marvell CEO Matt Murphy said the AI industry is moving towards optical connections. He said powerful AI systems need faster ways to communicate with each other, creating a major opportunity for companies that make optical connectivity products.
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{{/usCountry}}Murphy described the shift towards optical connectivity as a once-in-a-generation opportunity. He said AI infrastructure is going through a major change in the way its systems connect and communicate.
Marvell to pay $115 billion for Lumentum
Under the agreement, Lumentum shareholders will receive 4.5 Marvell shares for every Lumentum share they own. The deal values Lumentum at approximately $115 billion, or $1,132 per share, according to the announcement.
The offer represents a 23.9% premium over Lumentum's October 28 closing share price. This means Marvell is offering a price that is nearly 24% higher than Lumentum's closing market price on that day.
Marvell's market value stood at around $176 billion on Monday morning. Lumentum's market value was close to $76 billion at the same time. The acquisition will give Marvell greater access to optical technology and manufacturing capacity. These have become important requirements for building AI infrastructure as companies expand their AI computing systems, according to Yahoo Finance.
AI growth increases demand for faster connections
Optical technology has become an important part of AI infrastructure. As AI systems become more powerful, they need faster connections to transfer large amounts of data between computers and other equipment.
Lumentum makes lasers and other optical components used in these connections. Its products help AI systems communicate faster and support the growing demand for advanced computing infrastructure, according to Yahoo Finance.
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Marvell designs high-speed infrastructure products and custom chips. These chips help AI computers communicate with one another and are used in the wider infrastructure needed to run AI systems. Marvell competes with semiconductor company Broadcom in the AI infrastructure market. Both companies work on technologies that help connect and power advanced computing systems.
Nvidia CEO Jensen Huang backs Marvell's growth
Marvell has already attracted attention from Nvidia CEO Jensen Huang. Earlier this year, Marvell shares rose sharply after Huang described the chipmaker as "the next trillion-dollar company", according to Yahoo Finance.
Marvell also joined the S&P 500 index in June. The index tracks some of the largest publicly traded companies in the US, and Marvell's inclusion marked another major development for the chipmaker.
Marvell and Lumentum shares rise over 100% in 2026
Despite falling more than 3% on Monday, Marvell shares have gained over 130% so far this year. Lumentum shares have also performed strongly, rising 128% year to date, according to Yahoo Finance.
The acquisition comes as demand for AI infrastructure continues to grow. By bringing Marvell's chip technology together with Lumentum's optical components and manufacturing capacity, the companies aim to strengthen their position in the market for faster AI connectivity.