Marvell Secures Major Chip Deal with Alphabet, Broadcom Stocks Plummet

Marvell Technology has secured a significant custom chip agreement with Alphabet Inc., parent company of Google. Under the deal, Marvell will help develop specialized chips for Google's Tensor Processing Units (TPUs), which are used in its artificial intelligence infrastructure.

The agreement also includes a warrant for Google to buy nearly 59 million Marvell shares at $206.58 each, representing an aggregate exercise price of roughly $12.2 billion if fully exercised. However, the warrant is tied to how much business Marvell wins from Google, with approximately 240,000 shares vesting for every $500 million in qualifying revenue through early 2033.

Marvell designs semiconductors used in data centers, networking and storage systems, and has become a major supplier of custom chips for cloud companies building their own AI infrastructure. The company will develop a range of custom silicon attached to Google's TPU ecosystem, including AI inference accelerators, networking chips, storage controllers, memory interface controllers and near-memory computing technology.

Broadcom Inc., which is already deeply entrenched at Google, fell more than 5% on the news as investors weighed the threat from a second major supplier inside Google's custom-AI-chip ecosystem. However, Marvell emphasized that it will not be replacing Broadcom, but rather capturing a growing share of Google's future AI silicon spending.