Marvell Hands Google an Option on $12.2 Billion of Its Own Shares in an Expanded Custom-Chip Deal

Verified key facts

• Marvell Technology has granted Google a warrant to buy up to 58,970,907 of its shares at $206.58 each, a stake worth about $12.2 billion, Reuters reported
• The warrant is tied to chip purchasing milestones running through Marvell's 2033 fiscal year, according to Reuters
• Roughly 240,000 shares vest for every $500 million of qualifying chip purchases Google makes from Marvell, CNBC reported
• If Google meets the targets the arrangement depends on, the deal could be worth around $120 billion in revenue to Marvell through fiscal 2033, per CNBC
• Marvell shares rose about 10% on the announcement, CNBC reported, while Broadcom, until now Google's principal custom chip partner, fell more than 5%
• The expanded agreement covers products that attach to the tensor processing unit ecosystem, including AI inference accelerators and storage and network interface controllers, according to Reuters
• Google has been converting its internally developed TPUs into a commercial platform and positioning custom silicon as an alternative to Nvidia GPUs for some AI workloads

A Warrant Instead of a Contract

Marvell Technology will help build Google's custom artificial intelligence chips, and has given the company the right to acquire a stake in Marvell worth about $12.2 billion if it does enough business with it, Reuters reported.

The instrument is a warrant rather than a share purchase. It covers up to 58,970,907 Marvell shares at an exercise price of $206.58 each, and Google only earns the right to buy them by placing orders.

CNBC reported the vesting mechanism in detail: roughly 240,000 shares vest for every $500 million of qualifying chip purchases. That converts a supply agreement into something closer to a joint commercial interest, in which Marvell's supplier gains directly from Marvell's share price.

The Size of the Order Book Implied

Running the vesting arithmetic backwards gives the scale of the commitment. To vest the full warrant, Google would need to place qualifying orders of roughly $120 billion with Marvell through the 2033 fiscal year, a figure CNBC reported as the deal's headline potential value.

That is not a guaranteed number. It is the ceiling of a structure that pays out proportionally, so partial performance vests a partial stake, and the two sides have deliberately built an arrangement in which neither has to forecast eight years of AI demand accurately in advance.

For Marvell, a company whose annual revenue is a fraction of that figure, the arrangement is transformative if it is even half met, which is why the market reaction was as sharp as it was.

What the Chips Actually Do

The expanded agreement covers products that attach to the tensor processing unit ecosystem, Reuters reported, including AI inference accelerators and storage and network interface controllers.

That description is more specific than it first appears. Google designs the TPU itself, but a large accelerator cluster is mostly not accelerator: it is the interconnect, the network interface silicon, the storage controllers and the components that move data between chips fast enough to keep them busy.

Marvell's established strength is precisely in that connective tissue rather than in the compute die. The deal therefore extends Google's custom silicon strategy sideways across the rack rather than deeper into the processor.

Broadcom Loses Ground

The market read the announcement as a transfer of position. CNBC reported that Marvell shares rose about 10% while Broadcom, which had been Google's main custom chip partner, fell more than 5%.

Broadcom's custom accelerator business has been built substantially on Google's TPU programme, and any diversification by its largest customer in that line is material. The move does not remove Broadcom from the programme, but it establishes a credible second supplier with an unusually strong incentive to win share.

That is the conventional logic of second-sourcing applied at an unusual scale. What is novel is paying for it with equity in the supplier rather than with volume commitments alone.

Why Google Keeps Building Its Own Silicon

Google has been steadily turning its TPUs from an internal advantage into a broader commercial platform, positioning custom silicon as an alternative to Nvidia's GPUs for particular AI workloads, especially inference at large volume.

The economics favour that for any operator running its own models at scale. A general-purpose GPU carries capability the workload does not use, and it carries a supplier's margin. A custom part sized to the workload removes both, provided the volume justifies the design cost.

The strategic argument is about supply as much as cost. An operator with its own accelerator line and its own interconnect silicon is not competing for allocation in a constrained GPU market, which over the past three years has been the binding limit on how quickly large models could be deployed.

Big Tech Buys Into Its Own Suppliers

The structure belongs to a wider pattern. Reuters described it as the latest deal in which large technology companies invest in the suppliers powering their AI build-out, and comparable arrangements have appeared across the chip and infrastructure supply chain this year.

The appeal to the buyer is that it converts a cost line into an asset. If Marvell's business grows because Google's orders grow, Google captures part of that appreciation rather than watching a supplier's multiple expand on the strength of its own spending.

The appeal to the supplier is certainty. A warrant tied to purchase milestones gives Marvell a reason to build capacity against a demand signal that is contractual rather than speculative, which is the harder half of the semiconductor planning problem.

The risk sits with shareholders on both sides. Marvell's existing investors face dilution of nearly 59 million shares if the warrant vests in full, and Alphabet is committing capital to a supplier relationship whose value depends on AI infrastructure demand holding up for the better part of a decade.

The Milestones That Decide Whether Any of It Vests

Everything in the arrangement depends on order flow that has not happened yet. The first observable checkpoint is Marvell's own reporting: qualifying purchases at the $500 million granularity will show up in the company's data centre revenue line well before any warrant tranche becomes material.

The second is whether Broadcom's Google-linked business declines in absolute terms or merely grows more slowly. A second source that takes incremental volume is a very different outcome for Broadcom from one that takes existing volume.

The third is the exercise price. At $206.58 a share, the warrant only has value to Google if Marvell trades above that level when tranches vest, which ties a supply relationship running to 2033 to the sustained direction of AI infrastructure spending.

Sources

• Reuters - Marvell gives Google option to buy $12.2 billion stake in custom AI chip deal
• CNBC - Marvell's stock pops 10% on AI chip deal that lets Google buy up to $12.2 billion in shares
• The Next Web - Marvell hands Google a $12.2bn share option in a custom-chip deal
• Yahoo Finance - Marvell grants Google $12.2 billion warrant