Marvell plunges 13%, Lumentum plunges 19%! The second largest tech merger in history triggers sell-off

Marvell Technology has announced its acquisition of optical technology company Lumentum Holdings, a move set to become one of the largest mergers in tech industry history and Marvell’s biggest bet yet in its transformation into a core supplier of AI infrastructure.

Marvell will acquire Lumentum through an all-stock deal valuing the enterprise at approximately $115 billion, with an equity value of about $102.6 billion. After the transaction, Marvell shareholders will hold about 67% of the merged company, while Lumentum shareholders will own approximately 33%. The two companies stated that the deal is expected to close in the first half of 2028.

Marvell CEO Matt Murphy said during a Monday conference call: “Marvell has spent a decade establishing a strong position at the heart of AI-driven technology; this transaction marks the decisive next step in that journey.”

However, the market’s reaction has not been favorable. On Monday, Lumentum’s stock price dropped 19% to $684.40, while Marvell fell 13% to $171.41.

Investors' concerns focus on three main points: the current pressure on AI stock valuations, limited cost synergy potential between the two companies, and the uncertainty around regulatory approval.

According to data compiled by Bloomberg, this acquisition ranks as the largest merger of the year by equity value, second only to the merger between SpaceX and xAI in tech industry history.

This deal underscores how the AI boom is driving blockbuster mergers and acquisitions across nearly all major sectors, including chips, data center operations, and utilities. Before the transaction was announced, Lumentum’s market value was around $76 billion, while Marvell’s market capitalization stood at about $172.2 billion.

Qatalyst Partners is serving as Marvell’s lead financial advisor. Goldman Sachs and JPMorgan are also advising Marvell, while Citi and Evercore are acting as Lumentum’s financial advisors.

Lumentum’s core business is the manufacturing of lasers and other optical components used to deliver massive amounts of data at high speed across data centers and telecom networks. This hardware serves as the foundation for AI infrastructure expansion, enabling efficient transmission of information throughout servers, facilities, and nodes within a data center.

Marvell has previously sourced laser technology from Lumentum and continues to invest in optical and photonics technologies. Earlier this year, Marvell completed the acquisition of photonic chipmaker Celestial AI. By bringing Lumentum into the fold, Marvell further enhances its vertical capabilities in the emerging field of “using light instead of copper wire for data transmission.”

Notably, Nvidia announced a $2 billion investment in Lumentum this March, with both parties planning to collaborate in photonics technology. Marvell’s full acquisition of Lumentum now signals a new strategic landscape for Nvidia’s partnership with Lumentum.

In the AI chip segment, Marvell already partners with Amazon Web Services and Microsoft, supporting the customization of AI chips. In August, the company also reached a deal with Google, a subsidiary of Alphabet, to support its Tensor Processing Units (TPUs).

Acquiring Lumentum represents a natural extension of Marvell’s strategy—by incorporating optical transmission capabilities into its product offerings, Marvell can provide major cloud players with a more comprehensive solution, ranging from custom chips to data center optical interconnects.

However, analysts note the two companies have limited operational overlap, meaning significant cost synergies are unlikely. The planned 2028 closing also implies a complex regulatory review process. With AI sector valuations under pressure and market skepticism toward the industry’s spending pace, whether Marvell’s bold acquisition will win investor approval remains a major question mark.