Challenge Nvidia? Marvell acquires Celestial AI, betting on "next-generation optical interconnect technology"

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Chip manufacturer Marvell Technology is making a major bet on the future of AI infrastructure through a strategic acquisition worth billions of dollars.

On Tuesday, Marvell announced it would acquire semiconductor startup Celestial AI for $3.25 billion in cash and stock. According to the agreement, if Celestial AI achieves certain revenue milestones, the total value of the deal could rise to as much as $5.5 billion.

The core of this acquisition is photonic interconnect technology, regarded as the key to solving the AI computing power bottleneck. As the scale and complexity of large language models continue to rise, data centers need to link hundreds or thousands of chips into a collaborative whole, but traditional copper connections are reaching their limits. Marvell aims to seize the technological transition from “electrical” to “optical.”

Even more crucially, by acquiring Celestial AI’s leading photonic interconnect technology, Marvell strengthens its competitiveness in the AI data center connectivity field, going head-to-head with Nvidia and Broadcom. At the same time, Marvell gains the backing of industry giants. Marvell issued stock warrants to its major client Amazon, binding this acquisition deeply with future product procurement, reflecting key customers’ recognition of this technology.

This news, together with the company’s strong financial report and optimistic guidance, immediately ignited market enthusiasm. Marvell’s stock price soared as much as 13% in after-hours trading on Tuesday. The company expects its data center business revenue to grow 25% in the next fiscal year, driven by AI demand.

A bet of up to $5.5 billion

According to the deal terms, Marvell will pay $1 billion in cash and $2.25 billion in 27.2 million shares of Marvell common stock. In addition, the agreement includes a key “earnout” clause: If Celestial AI achieves $2 billion in cumulative revenue by the end of fiscal year 2029, Marvell will make additional payments, bringing the total deal value up to the $5.5 billion cap.

The transaction is expected to close in the first quarter of 2026.

Marvell CEO Matt Murphy said in a statement: “This acquisition builds on our technology leadership, broadens our potential market in large-scale connectivity, and accelerates our roadmap to provide the industry’s most complete connectivity platform for AI and cloud customers.”

Marvell expects Celestial AI will begin to contribute significant revenue in the second half of fiscal year 2028, reaching $500 million annualized revenue in Q4 of fiscal 2028, and doubling to $1 billion annualized revenue in Q4 of fiscal 2029.

Photonic Interconnect: The "Nervous System" of AI Data Centers

Founded in 2020, Celestial AI focuses on developing photonic interconnect hardware. Its core product is called “Photonic Fabric”—a technology that uses light signals, rather than traditional electrical signals, to transmit data between chips, aiming to achieve higher data bandwidth at lower latency and power consumption.

As AI models’ demand for computing power rises explosively, data transmission bottlenecks are becoming more pronounced. Photonic technology can transmit more data faster and over longer physical distances than traditional copper lines, and is thus seen as key to next-generation high-performance computing. Celestial AI claims its platform can boost bandwidth between chips by up to 25 times while significantly reducing power consumption.

Celestial AI CEO David Lazovsky previously said that their technology platform “meets these critical demands while setting new standards in bandwidth, latency, energy efficiency, and total cost of ownership.” The startup’s investors include AMD Ventures and BlackRock, and among its board members are industry veterans such as former Intel CEO Lip-Bu Tan.

Targeting Nvidia, Amazon Joins In

With the acquisition of Celestial AI, Marvell aims to build a “silicon photonics giant,” directly entering the high-end connectivity market dominated by Nvidia and Broadcom. According to Reuters, Marvell CEO Matt Murphy stated that this technology will open up a new $10 billion market for Marvell. He expects major cloud companies to begin deploying photonic technology on a large scale in 2027 or 2028.

Notably, Marvell has also formed a deep partnership with Amazon. As part of the deal, Marvell issued a stock warrant to Amazon, allowing Amazon to purchase up to $90 million of Marvell stock at an exercise price of about $87 per share by the end of 2030, based on their photonic interconnect product procurement amount.

This move not only locks in potential future orders but is also seen by the market as a strong endorsement of the technology from a key customer. Dave Brown, Vice President of Amazon Web Services (AWS), said in a statement that Marvell’s acquisition of Celestial would “help further accelerate innovation in optical scaling for next-generation AI deployments.”

Strong Performance and Rosy Guidance Boost Market Confidence

Prior to the acquisition announcement, Marvell’s stock had fallen more than 15% in 2025, underperforming rivals whose valuations have surged due to the AI boom. However, the acquisition news combined with an impressive financial report completely reversed market sentiment.

Marvell’s Q3 financial report showed earnings per share of $0.76 and sales of $2.08 billion, both exceeding analyst expectations compiled by LSEG. The company also forecast fourth-quarter revenue of $2.2 billion, above the market expectation of $2.18 billion.

Even more encouraging to the market was the company’s outlook. Marvell expects total revenue in the next fiscal year to reach about $10 billion, with data center revenue up 25% and custom chip business up 20%.

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