Google's Marvell Warrant Doesn't Fully Vest Until Google Buys $120 Billion of Chips

Shares of chipmaker Marvell Technology (NASDAQ:MRVL) jumped about 10% Wednesday morning, as of this writing, after the company disclosed an expanded custom chip partnership with Google, the search giant owned by Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL).

Attached to the partnership is a warrant giving Google the right to buy 58,970,907 Marvell shares -- about $12.2 billion worth at the warrant's exercise price.

The size of the award explains the pop. But to me, the more revealing part of the filing is the vesting schedule, which spells out exactly what Google has to do to earn those shares: buy chips. One installment of shares vests for every $500 million of revenue Marvell recognizes from Google and its affiliates for the custom products covered by the agreement. There are 240 installments in all.

And 240 times $500 million is $120 billion.

Image source: The Motley Fool.

Vesting runs on Google's purchases

The warrant's exercise price is $206.58 per share, comfortably below the roughly $234 the stock fetched Wednesday morning.

The shares come in two buckets. A small slice (1,360,867 shares) vests on a clock, in quarterly installments over the first year. The other 57,610,040 shares vest only as Google's money arrives. Each time cumulative purchases reach another $500 million during the agreement's measuring period, which runs from Aug. 1, 2026 through Jan. 29, 2033, another 240,042 shares unlock.

Not just any Marvell sale counts, either. The revenue must come from the specific custom semiconductor products covered by the agreement the companies signed in late July. According to the filing, those programs attach to the ecosystem around Google's in-house TPU chips and include artificial intelligence (AI) inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near-memory compute.

In other words, the only spending that counts is spending on the custom chips Google came to Marvell for.

Full vesting would rebuild Marvell around one customer

Marvell doesn't break out its revenue from custom chips. But its data center end market (the home of that work) generated $1.8 billion of revenue in the fiscal first quarter of 2027 (the period ended May 2, 2026), up 27% year over year and good for 76% of total sales. Companywide revenue was a record $2.4 billion, up 28% year over year. And management guided for about $2.7 billion in the fiscal second quarter, up 35% at the midpoint, with CEO Matt Murphy saying he expects growth to keep accelerating each quarter through the fiscal year.

That momentum is impressive. But multiply the record quarter by four and the entire company (every product line, every customer) runs at under $10 billion a year.

Full vesting of the warrant requires $120 billion from Google alone over about six and a half years. That averages out to roughly $18.5 billion a year -- more than double what all of Marvell's customers combined delivered over the past four reported quarters.

But what has Google promised?

Google, for its part, hasn't disclosed a commitment to buy any of it. The filing describes the purchases that drive vesting as discretionary. Nothing in the filing obliges it to reach $120 billion, or any particular number, and it can slow the qualifying purchases whenever it likes.

The warrant just makes each dollar of spending a little more rewarding, because purchases earn Google equity in its supplier at a fixed price. And the bill goes to Marvell shareholders. Fully vested and exercised, the warrant shares would add about 7% to the company's current share count.

With that said, a company arguably doesn't build a 240-installment vesting schedule for a program it expects to stay small. The agreement could eventually make Google one of Marvell's largest customers. And it arrives with the chipmaker's data center revenue already accelerating -- from $1.4 billion in the fiscal first quarter of 2026 to $1.65 billion in the fourth quarter to $1.8 billion in the latest period.

At about $234 as of this writing, the growth stock has nearly quadrupled from its 52-week low, though it remains well below its 52-week high. Wednesday's move alone added about $18 billion of market value.

Some enthusiasm is justified, I think, since the deal is structured around the possibility of enormous spending. But the $120 billion is the ceiling on an ambition, not a forecast, and the vesting runs only as fast as Google decides to buy.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Marvell Technology. The Motley Fool has a disclosure policy.