Partnering with Google to develop custom chips + potential $12.2 billion investment! Marvell Technology (MRVL.US) surges in pre-market trading

According to Jinzi Finance APP, Marvell Technology (MRVL.US) has reached a custom chip cooperation agreement with Google (GOOGL.US), and has also issued a warrant to Google, allowing the latter to purchase approximately $12.18 billion worth of Marvell Technology shares. Boosted by this news, Marvell Technology's shares surged nearly 13% in pre-market trading on Wednesday at the time of writing.

In recent years, as companies seek alternatives to NVIDIA's (NVDA.US) expensive graphics processing units (GPUs), the demand for custom chips such as Google's Tensor Processing Unit (TPU) for AI workloads has grown significantly. According to statements released by Marvell Technology and Google, the two companies will cooperate to develop AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near-memory computing technologies.

In addition, Marvell Technology stated that it has issued a warrant to Google allowing the purchase of up to 58.97 million shares at an exercise price of $206.58 per share. The company signed a commercial agreement with Google on July 29 to provide customized chip products. In the first year after the agreement is signed, 1.360867 million optioned shares will vest each quarter. The remaining shares will vest based on “self-purchases” between Marvell Technology's fiscal Q3 2027 and the end of fiscal 2033, with a batch of shares vested each time the jointly developed products generate $500 million in revenue.

Meanwhile, Marvell Technology’s much larger competitor Broadcom (AVGO.US) fell more than 3% in pre-market trading. For a long time, Google has mainly relied on Broadcom to help design its self-developed TPUs. Both Marvell Technology and Broadcom are able to help clients turn chip designs into chips that can be manufactured, providing back-end support prior to the wafer manufacturing stage, with final production done by wafer foundries such as TSMC. As major technology companies accelerate the development of their own AI chips, this business is becoming an important growth engine for both companies.