On 2 November Marvell agreed to acquire optical communications company Lumentum for USD 115 billion, roughly RMB 800 billion, in the largest deal the AI chip supply chain has seen.
The scale is easier to grasp in comparison. Marvell’s revenue in its last fiscal year was about USD 8.2 billion, so the price equals roughly fourteen years of the buyer’s own turnover.
Investors read it as expensive. Marvell fell more than 10 per cent and Lumentum more than 15 per cent when the deal was confirmed.
Both sides were already Nvidia-backed
In March, Nvidia invested USD 2 billion in Marvell as part of a collaboration on connectivity technology for AI infrastructure, and separately invested USD 2 billion in Lumentum under a multi-year arrangement supporting advanced optical development and capacity. Nvidia has now effectively watched one of its portfolio companies buy the other.
The problem the deal is meant to solve
Buying tens of thousands of GPUs and installing them in one data centre creates a communication problem. Each accelerator has to exchange data with the others constantly, and if the interconnect is slow, the compute waits. The analogy the Chinese coverage uses is a factory that bought the fastest machines available and then connected them with a conveyor belt that cannot keep up.
Short-reach links inside servers and between racks have historically run on copper. As clusters grow and data volumes rise, electrical connections run into limits on bandwidth, power and distance at the same time. Optical links, which convert electrical signals to light and move data over fibre, avoid all three.
Lumentum, spun out of JDS Uniphase in 2015
Lumentum has made lasers and optical communications components for years, first for telecoms. What changed its valuation was AI data centres. As Microsoft, Google, Amazon and others built out AI infrastructure, demand for high-speed optical modules, lasers and optical switching equipment rose sharply. Revenue in its 2026 fiscal year reached USD 3.014 billion, up 83.2 per cent.
Marvell’s own transformation followed a similar logic. The company was founded in 1995 by Sehat Sutardja, his wife Weili Dai and his brother Pantas Sutardja, and built its business on hard drive controller chips before listing on Nasdaq in 2000. The founders left management in 2016, Matt Murphy took over as chief executive, and the company shifted resources from consumer electronics into data centre and networking silicon, acquiring Cavium in 2018 and Inphi in 2021 at a transaction value of about USD 10 billion.
In its 2026 fiscal year Marvell’s revenue reached about USD 8.2 billion, and the following quarter came in at USD 2.739 billion, up 37 per cent year on year, driven by data centre.
The deal is priced at enterprise value
The USD 115 billion figure includes debt and other items, and the transaction is structured as a share exchange. If it completes, Marvell would own both the electrical interconnect silicon and the optical components, and could sell a more complete connectivity package instead of leaving customers to buy chips, lasers and modules separately and then spend engineering time making them work together.
Whether that integration is worth fourteen years of revenue is the question the market asked on day one by selling the stock.
Editor’s note: This is an adapted translation of the original Sohu Tech report. It has been trimmed and restructured for readability for an international business audience. The full original (in Chinese) is at https://www.sohu.com/a/1098050439_649045.