Marvell Technology announced its largest acquisition in company history on Tuesday, acquiring artificial intelligence startup Celestial AI for $3.25 billion in cash and stock.
The total deal value could reach $5.5 billion if revenue targets are met by the end of Marvell's fiscal year 2029.
The acquisition represents a strategic move by the Santa Clara-based chipmaker to capitalize on explosive demand for AI data center infrastructure and optical interconnect solutions.
The announcement coincided with Marvell reporting strong third-quarter financial results, with revenue reaching $2.075 billion, up 37 percent year-over-year.
The news triggered a significant market response, with Marvell shares surging as much as 15 percent in after-hours trading on Tuesday.
This rally reversed earlier losses the stock had suffered throughout 2025, when shares had fallen between 15 and 18 percent amid investor concerns about intensifying competition in the custom AI chip market.
Why Marvell Made Its Largest Acquisition Ever
Marvell's decision to acquire Celestial AI reflects the chipmaker's strategic commitment to controlling critical technologies that enable the next generation of AI infrastructure.
The semiconductor industry increasingly recognizes that optical interconnect solutions represent a fundamental shift in how data centers will operate.
By acquiring Celestial AI, Marvell gains proprietary technology that addresses a critical bottleneck in AI systems, allowing the company to offer integrated solutions to major cloud computing providers.
The acquisition also signals Marvell's confidence in long-term demand for AI infrastructure and its determination to maintain technological leadership amid intensifying competition.
Amazon Web Services, a key Marvell customer for its Trainium AI accelerators, expressed strong support for the acquisition.
AWS Vice President Dave Brown stated that the deal would further expedite optical scale-up innovation for next-generation AI deployments.
This endorsement from AWS underscores the strategic importance of Celestial AI's technology to major cloud infrastructure operators.
Did you know?
Celestial AI's optical interconnect technology delivers 16 terabits per second of bandwidth, which is ten times the capacity of current leading ports used in AI scale-up applications.
How Photonic Fabric Technology Changes AI Data Centers
Celestial AI's proprietary Photonic Fabric technology represents a fundamental innovation in how data moves between AI processors and memory chips.
The technology uses light, specifically photons, instead of traditional electrical signals transmitted through copper interconnects.
This approach delivers more than twice the power efficiency of conventional copper-based interconnects, a critical advantage in data centers where power consumption directly impacts operational costs and environmental impact.
The startup's first-generation chiplet achieves 16 terabits per second of bandwidth, providing ten times the capacity of current leading ports in scale-up applications.
This massive increase in bandwidth capacity enables AI systems to process data significantly faster, reducing latency and improving overall system performance.
Marvell intends to integrate this optical technology into custom AI chips and network switches designed for large cloud computing systems, creating an end-to-end optical connectivity solution that addresses the needs of modern AI infrastructure.
What This Deal Means for Cloud Infrastructure Giants
Major cloud computing providers, including Amazon Web Services, Google Cloud, and Microsoft Azure, have invested heavily in building custom AI infrastructure to support generative AI models and enterprise applications.
These providers face intense pressure to optimize data center efficiency while meeting surging demand for AI computing capacity.
Marvell's acquisition of Celestial AI enables the company to offer comprehensive solutions that address these challenges through integrated optical interconnect technology.
Cloud infrastructure companies can now work with Marvell to design and deploy next-generation data centers that leverage optical interconnects from chip design through network architecture.
This vertical integration provides cloud providers with more control over their infrastructure, reduced power consumption, and superior performance compared to traditional approaches.
As AI workloads continue to expand and become more demanding, optical interconnect solutions are likely to become increasingly critical to competitive advantage in cloud infrastructure markets.
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Revenue Targets and Timeline for Integration
Under the agreement structure, Celestial AI receives $1 billion in immediate cash payment, combined with approximately 27.2 million Marvell shares valued at $2.25 billion.
An additional $2.25 billion in Marvell stock becomes payable if Celestial AI achieves cumulative revenue exceeding $2 billion by the end of Marvell's fiscal year 2029.
This performance-based structure aligns incentives between both companies and ensures Marvell benefits from successful technology deployment and market adoption.
Marvell expects revenue contributions from Celestial AI to commence in the second half of fiscal 2028. The company projects the acquired business will achieve a $500 million annualized run rate by the fourth quarter of fiscal 2028 and scale to $1 billion by the fourth quarter of fiscal 2029.
These projections reflect confidence in the rapid adoption of optical interconnect technology among major cloud infrastructure operators.
The transaction is expected to close in the first quarter of 2026, pending customary regulatory approvals and closing conditions.
The Competitive Landscape After Marvell's Bold Move
Celestial AI was founded in 2020 and has attracted significant investment from leading financial and technology firms. The startup raised more than $515 million from investors, including Fidelity Management & Research Company, BlackRock, and Advanced Micro Devices.
In March 2025, Celestial AI achieved a $2.5 billion valuation during its most recent funding round, demonstrating strong investor confidence in the company's technology and market opportunity.
Notably, Intel CEO Lip-Bu Tan joined Celestial AI's board in January, highlighting the importance of optical interconnect technology across the semiconductor industry.
Marvell's acquisition positions the company as a leader in optical interconnect solutions at a critical moment when demand for AI infrastructure is accelerating globally.
Competitors, including Intel, Advanced Micro Devices, and other semiconductor firms, are also investing heavily in AI infrastructure technologies.
By securing Celestial AI's photonic fabric technology and talented engineering team, Marvell gains a significant technological advantage and first-mover benefits in deploying optical interconnects at scale.
This strategic acquisition reflects broader consolidation trends in the semiconductor industry as companies race to secure critical technologies that will define AI infrastructure for the next decade.
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