Marvell Technology (MRVL) is in advanced talks to acquire optical components maker Lumentum Holdings (LITE), according to a Bloomberg report citing unnamed sources. A deal could be announced as early as next week, though details are not finalized and the discussions could still fall apart.
The potential acquisition would be one of the largest tech deals of the year. Lumentum closed Wednesday with a market value of about $82.79 billion, while Marvell's market capitalization stood at roughly $220.67 billion. Analysts estimate the purchase price could reach $100 billion or more, with Mizuho's Vijay Rakesh noting that semiconductor deals over the past 15 years have averaged a 38% premium. That would imply a Lumentum share price above $1,260, compared with its Wednesday close of $913.95.
Investors reacted sharply to the report. Marvell fell about 10% in premarket trading Thursday, while Lumentum rose about 6%. The move reflects classic merger arbitrage behavior: buyers often drop on dilution fears while targets rally on the expected premium. Marvell held only about $3.92 billion in cash and short-term investments last quarter, so any deal would likely require substantial new equity, debt, or both.
Marvell sees Lumentum's high-speed optical products as a way to strengthen its AI data center stack. Lumentum said its products are sold out through 2029, and analysts expect annual revenue to jump about 110% to $6.3 billion this year, followed by $10 billion next year. Marvell, which partners with Google and Microsoft on custom silicon, is expected to report revenue of $12 billion this year and $20 billion next year.
Still, the transaction carries risks. Lumentum trades at a forward price-to-earnings ratio of about 40, and the deal could be struck near the top of the AI boom. The AI Stock Bubble Index has reached its highest level in months, and investors such as Ray Dalio and Ken Griffin have warned that the bubble may burst soon. Broader market conditions also added pressure: Alphabet's latest results missed revenue and earnings estimates and showed negative free cash flow, Nasdaq futures fell sharply, and the Federal Reserve held its benchmark rate at 3.75% to 4.0%.
Marvell has been active in acquisitions, announcing purchases of Celestial AI for $3.25 billion and XConn for $540 million in the past year. Buying Lumentum would mark a dramatic jump in deal size and transform Marvell's portfolio, but for now investors appear focused on the cost and financing risks.
