Marvell Technology Inc. has announced an expansion of its chip development partnership with Alphabet Inc.'s Google. Under this agreement, Marvell has granted the search giant an option to purchase shares totaling up to $12.2 billion.
According to Marvell's announcement, Google can acquire up to nearly 59 million shares of Marvell at a price of $206.58 per share. Regulatory filings submitted on Wednesday indicate that approximately 1.4 million shares will become available within the first year of the deal. Subsequently, the remaining shares will be delivered in tranches over 240 periods until the end of fiscal year 2033, with each tranche tied to $500 million in revenue from the sale of custom chips to Google.
These specialized chips are intended for use in Google's Tensor Processing Unit (TPU) ecosystem and will include AI inference accelerators, data storage controllers, network interface controllers, memory interface controllers, and near-memory compute blocks. The TPU is a specialized chip designed for efficient execution of AI calculations.
Following the announcement, Marvell shares rose by 14%, reaching $245.49 at the New York market open, while Alphabet shares remained largely unchanged.
Companies like Google, which heavily invest in AI infrastructure, are seeking ways to reduce the cost of chips, including AI accelerators from Nvidia Corp., which are considered industry leaders. Other hyperscalers, such as Amazon.com Inc., are also developing their own semiconductors to run AI models or perform inference.
Google's TPUs have become a significant advantage for customers as they make chips accessible to Google Cloud customers in their own data centers. Analyst Citizens Andrew Boone previously predicted earlier this year that Alphabet would earn around $3 billion from TPU-related infrastructure this year and $25 billion in 2027.
As Google's business grows, its demand for custom chips has increased. In April, the company signed a similar agreement with Broadcom Inc. for the development and supply of custom TPUs. However, following the news of another major chip manufacturer partnering with Google regarding TPUs, Broadcom shares fell by 2.4% at the market open.