Google strikes AI chip alliance with Marvell, secures warrants worth up to $12.18b

Google has teamed up with US semiconductor design firm Marvell Technology to secure a custom AI chip supply chain, obtaining warrants to acquire a major stake in the company.

Marvell disclosed Wednesday that it had signed a custom semiconductor development and supply agreement with Google and granted the tech giant warrants to purchase up to 58,970,907 shares of its common stock at $206.58 per share.

If Google exercises all the warrants, the total value would reach $12.18 billion. Upon completion of the deal, Google would become one of Marvell's five largest shareholders.

However, to acquire such a large stake, Google must proportionally increase its purchases of Marvell products.

Of the shares covered, 1,360,867 are to vest in equal quarterly installments over the next year. The bulk of the remainder is divided into 240 tranches, with one tranche of purchase rights unlocking each time Marvell's custom-product sales attributable to Google reach $500 million.

If Google meets all of those purchasing targets, Marvell stands to generate cumulative sales of up to $120 billion from Google through fiscal year 2033.

Google designs the core logic of its own AI chips — Tensor Processing Units (TPUs) — in-house, but relies on partners to handle detailed chip design and production management.

It also needs a supplier for custom semiconductor products to integrate into the TPU ecosystem. Google has largely relied on Marvell's rival Broadcom for that role, but appears set to shift more of its dependence toward Marvell going forward.

News of the partnership sent Marvell shares up more than 9% during trading, hovering around $235 as of 1 p.m. Eastern time, while Broadcom shares fell more than 4% to trade around $363 at the same time.

William Kerwin, a Morningstar market analyst, told Reuters the deal was "a big win for Marvell," but added that it appeared Google was "looking to grow the market by finding a new source of supply rather than replacing Broadcom with Marvell."

The partnership is also drawing attention as a sign of expanding financial ties between AI companies and semiconductor firms.

Nvidia recently signed a deal to provide $105 billion in financial guarantees for data centers being built by OpenAI, and AMD struck an agreement last October to grant OpenAI a stake of up to 10% tied to the volume of its AI chips the company purchases.