Marvell Technology is in advanced talks to buy Lumentum Holdings, a maker of lasers and optical components for data centers, in what could become one of the largest semiconductor deals of the year. The discussions are private and no final agreement has been reached, but a deal could be announced as soon as next week, and the market reaction alone shows how important the optical links inside AI data centers have become.
What the report says
The account of the talks comes from Bloomberg, citing people familiar with the matter, and was reported onward by Reuters. Lumentum shares rose about 11 percent in extended trading after the report, valuing the company at roughly $91 billion, while Marvell shares fell more than 8 percent as investors weighed the price and complexity of such a large acquisition.
Neither company has confirmed the talks, and neither immediately responded to requests for comment. No price, structure, or premium has been disclosed, and the timing remains subject to change, so the deal could still slip, shrink, or fall apart before any announcement.
The scale is striking. Lumentum’s market value of roughly $83 billion to $91 billion would make it worth more than a third of Marvell’s roughly $221 billion market value. It would also rank among the biggest bets yet that the future of AI infrastructure is decided not only by chips, but by the light-based connections between them.
Why optics suddenly matter
Lumentum makes optical components, including lasers and high-speed modules, that move data between servers as pulses of light, not electrical signals over copper wire. As AI clusters grow larger, copper links hit limits on reach and bandwidth, while optical links carry more data farther and faster, which is why optics have become a bottleneck part of the AI buildout.
Demand has outrun supply. Lumentum’s chief executive said that the company’s optical parts were sold out through early 2029, and that it could not meet about 70 percent of demand for some products, with some customers placing orders for 2030. The company plans to invest $350 million in Japan to expand production of indium phosphide and related parts.
That shortage is part of a wider scramble for AI hardware. Memory makers are riding the same wave, with SK Hynix reporting a $75 billion windfall from AI memory demand, and Chinese memory supplier CXMT pushing AI memory into production despite low yields. Optics is the next chokepoint in the same chain.
The financing question
Paying for Lumentum would be a challenge. Marvell held cash and cash equivalents of about $3.92 billion as of its latest quarter, a small fraction of any plausible price tag, and analysts at Bernstein said an acquisition of this size would likely be impossible to fund entirely with cash, raising questions about debt, stock, or both.
Marvell can point to momentum. Its shares have tripled this year as demand for its AI chips and networking products surged, and this month it raised its fiscal 2028 revenue forecast to $20 billion from $15 billion. Marvell already knows optics deals: its strategy was reinforced by the $3.25 billion acquisition of photonics firm Celestial AI announced late last year.
For Marvell, owning Lumentum outright would mean controlling optical technology it currently buys from third parties, tightening its grip on the data center networking stack. For Lumentum, a larger parent could fund the factory expansion its order book already demands, at the cost of independence at the peak of its market.
Why It Matters
If the deal closes, it would signal that the AI infrastructure race has moved beyond processors and memory into the connective tissue between machines. The winners in AI hardware may increasingly be the companies that own the full path a signal travels, from chip to laser to fiber, rather than any single component alone.
The risks are equally large. Big semiconductor mergers face long regulatory reviews, integration is rarely smooth, and Marvell’s own share-price fall shows investors are not yet convinced the price will be right. The pattern is familiar across the sector, where even $63 billion chip bets tied to AI labs are judged as much on financing and execution as on technology.
Background
Marvell designs custom AI chips and networking hardware for data centers, while Lumentum supplies lasers and optical modules used in communications networks and data centers.
Source: Reuters report and Dow Jones report
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