Marvell Wins $12.2 Billion Google Deal Amid Rapid Revenue Growth

Marvell Technology Group just secured a massive $12.2 billion deal with Google to co-design custom chips for Tensor Processing Units (TPUs). The agreement marks a significant shift in the market, as Marvell is now set to supply custom silicon to Google's TPU ecosystem, which was previously dominated by Broadcom.

The stock price of Marvell surged nearly 8% after the announcement, while Broadcom fell. Under the terms of the deal, Google will receive warrants on 58,970,907 Marvell shares at $206.58, which would be worth around $12.2 billion if fully exercised. This means that Google's equity upside and Marvell's revenue upside are closely tied, as the value of the warrant will only increase with each chip purchase.

The deal is significant not just for its size but also because it marks a major win for Marvell's strategy of 'XPU attach,' which involves attaching custom components to accelerators. CEO Matt Murphy believes that this approach will be key to unlocking growth in the AI inference market, where data transfer rates between memory and processors are becoming increasingly important.

The stock price of Marvell has already risen significantly this year, with a 190% gain so far. However, it still trades at a premium to its peers, with a forward EV/EBITDA multiple of around 43x and a forward earnings multiple of around 53x. Analysts expect the company's revenue to grow rapidly in the coming years, but some caution that the stock may be overvalued.