Marvell Bets Billions on Celestial AI in Race to Speed Up Data Centers - ( $AVGO $BLK $MRVL $NVDA ) - Vista Partners LLC

Marvell Technology (MRVL) has decided that if artificial intelligence is going to eat the world, it might as well own more of the cutlery. The chipmaker is buying optical‑interconnect startup Celestial AI in a cash‑and‑stock deal valued at about 3.253.25 billion dollars upfront, with performance sweeteners that could push the tab to roughly 5.55.5 billion dollars over time. For a four‑year‑old company that has raised just over half a billion dollars in venture capital, that is a celestial outcome indeed.

The deal, in Wall Street numbers

Under the terms announced, Celestial AI investors will receive 11 billion dollars in cash and Marvell shares initially valued at about 2.25 billion dollars, plus the prospect of up to roughly another 2.25 billion dollars in stock if the startup hits ambitious revenue goals through the end of Marvell’s fiscal 2029. In other words, Marvell is paying today as if Celestial is a proven growth engine, and then paying again if the engine actually turns over.

Marvell says Celestial’s photonics‑based connectivity could support a revenue run‑rate of around 500 million dollars in the back half of fiscal 2028, with a path toward 1 billion dollars annualized not long after. Even in a market drunk on AI multiples, that implies Marvell is valuing the company at several times projected sales that are still a few fiscal calendars away, a reminder that in AI infrastructure, story often arrives well ahead of earnings.

Why Marvell is buying light

Celestial AI’s calling card is “Photonic Fabric,” a platform that uses light instead of electrons to shuttle data between processors and memory, promising more bandwidth, lower latency and less power per bit in data‑center scale AI systems. That kind of optical plumbing is increasingly essential as AI clusters grow from a handful of accelerators in a box to thousands of chips stitched across rows of racks.

For Marvell, which already sells networking silicon, custom chips and optical components into cloud and AI data centers, the attraction is obvious: lock up a differentiated interconnect technology before a rival—or worse, a customer—does. Chief Executive Matt Murphy has cast the deal as a way to offer a “comprehensive connectivity platform” for AI and cloud clients, corporate for “please keep buying from us instead of Broadcom (AVGO) or Nvidia (NVDA).”

A pricey hedge against Nvidia envy

The timing also reflects a familiar form of Silicon Valley FOMO. Hyperscale operators are pledging hundreds of billions of dollars for AI infrastructure over the next several years, and each vendor with a pulse wants to be thought of as “critical path.” By owning an optical interconnect that can be embedded both in stand‑alone systems and custom AI silicon, Marvell is trying to ensure that, if Nvidia’s GPU complexes are the party, its chips are at least the valet, the bartender and possibly the DJ.

Public‑market investors, however, responded like accountants reading a poetry slam. Marvell shares fell about 5–6% in after‑hours trading as the company unveiled the deal alongside quarterly results, suggesting some concern that management is paying peak‑cycle prices for next‑cycle promises. In fairness, venture backers who funded Celestial at a roughly 2.5‑billion‑dollar valuation earlier this year can hardly be blamed for embracing such concerns from the comfort of their exit. However, MRVL shares are now trading up ~12% to there $104 level.

Startups in the age of earn‑outs

For Celestial AI, founded in 2020 and backed by the likes of AMD Ventures, Koch Disruptive Technologies, BlackRock (BLK) and Fidelity, the sale is a swift graduation from promising photonics outfit to line item on a large‑cap’s balance sheet. The company has raised more than 500 million dollars in equity across recent rounds, using the capital to acquire silicon‑photonics IP and scale manufacturing and foundry partnerships.

The heavy use of earn‑out stock tied to future revenue underlines a broader theme in AI hardware: buyers are willing to pay venture‑style valuations, but increasingly prefer to do it with options on performance rather than blind faith. If Celestial’s optical fabric becomes the de facto standard for wiring up the next wave of reasoning‑hungry AI models, Marvell will look prescient; if not, it will at least own a reminder that, in this market, even connectivity can come with a very expensive connection fee.

Marvell Bets Billions on Celestial AI in Race to Speed Up Data Centers – ( $AVGO $BLK $MRVL $NVDA )

The deal, in Wall Street numbers

Why Marvell is buying light

A pricey hedge against Nvidia envy

Startups in the age of earn‑outs

The Sources…

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