Marvell Just Bet $115 Billion On AI's 'Once In A Generation' Opportunity. Should You Buy The Stock?
Key Points
Marvell is buying AI laser maker Lumentum in a $115 billion all-stock deal that leaves current Marvell shareholders owning about two-thirds of the combined company.
Lumentum's revenue just jumped 136.5% to $1.26 billion, and Marvell says the deal should add to its adjusted earnings per share in the first year after closing.
Marvell shares have fallen over 20% since talks were first reported, so long-term investors willing to wait for a 2028 closing can buy into the bet at a lower price.
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Marvell (NASDAQ:MRVL) stock fell 13% on Thursday when word of a Lumentum (NASDAQ:LITE) takeover leaked, and the official terms, announced Monday, show what holders are paying. Marvell, which designs chips for data infrastructure, agreed to buy the optical-parts maker for about $115 billion in an all-stock deal, handing Lumentum's owners about a third of the combined company.
What Marvell Holders Give Up
Lumentum shareholders will receive 4.5 Marvell shares for each Lumentum share, or about $1,132 a share, a premium of about 23.9% to the October 28 closing prices, the last trading day before deal speculation began. After closing, current Marvell holders will own about 67% of the combined company on a fully diluted basis, and Lumentum holders about 33%.
So that's roughly a third of the ownership handed over. In the meantime, the deal is not expected to close until the first half of 2028, and it needs approval from both companies' shareholders and from regulators. Both boards approved it unanimously.
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Lumentum: A Fast-Growing AI Supplier
Lumentum makes lasers and optical components that link AI chips inside data centers. Its latest quarter, which ended on September 26, brought revenue up 136.5% to $1.26 billion, and it guided to roughly $350 million more next quarter, according to the Monday release.
Marvell CEO Matt Murphy, who stays chairman and CEO, called the moment one that "comes along once in a generation," adding that the companies that move first "will set the standard for decades to come." The companies say the combination expands their addressable market to $550 billion. Three Lumentum directors, including CEO Michael Hurlston, will join Marvell's seven-member board.
Meanwhile, Marvell's own targets are rising: It lifted its fiscal 2028 revenue outlook to $20 billion at its October 6 investor day and set a fiscal 2031 goal of $70 billion to $90 billion in revenue and earnings per share of $30 or more. Its fiscal 2026 diluted earnings per share was $3.07.
Marvell also points to more than $1 billion a year in cost savings, but that is a target the companies see "line of sight" to, rather than a result.
Who the Deal Works For
The sell-off came on higher volume, totaling about 40.4 million shares, which was well above the three-month average of 21.6 million. Investors worried over integration risk specific to the deal, but also more broadly about the massive amounts of AI spending that's impacting cash flow across the sector, as exemplified by Intel (NASDAQ:INTC) stock's record plunge on Friday. Marvell shares are down about 3% in pre-market trading on Monday, suggesting that investors still aren't sure about the deal's potential.
If you believe AI data-center spending has years to run, Marvell just bought a larger slice of it. But if you worry that spending will slow, you now own more of the part of AI that depends on it most, with a long wait and regulatory approval between you and the payoff.
Long-term investors, however, should find comfort in how much demand Marvell has already locked in. In August, it signed a deal to supply chips that sit alongside Google's AI processors, worth up to $120 billion in sales through fiscal 2033. Nvidia (NASDAQ:NVDA), the company at the center of the AI boom, invested $2 billion each in Marvell and Lumentum earlier this year. And despite the dilution, Marvell says the deal should add to its adjusted earnings per share in the first year after closing.
There's also the price. Since talks were first reported, Marvell shares have tanked over 20% amid the broader chip sell-off. Still, Wall Street hasn't walked away, with Stifel and Piper Sandler both reaffirming bullish ratings during the sell-off, and management, meanwhile, is aiming for $70 billion to $90 billion in revenue and $30 or more in earnings per share by fiscal 2031, up from $3.07 in fiscal 2026. Those targets are ambitious and far from guaranteed. But for investors who can hold through a 2028 closing, today's sell-off means buying into Marvell's biggest AI bet at a lower price than before anyone knew about it.
Marvell's next scheduled earnings report is expected on November 26.
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In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. If you’d invested $5,000 then, you’d be sitting on $2,660,110 today.*
Now, for the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. It’s a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast.
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*Stock Advisor returns as of November 2, 2026.
Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel, Lumentum, and Marvell Technology. The Motley Fool has a disclosure policy.
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