Marvell gives Google option to buy $12.2 billion stake in custom chip deal

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Aug 19 (Reuters) - Marvell Technology MRVL.O said on Wednesday it has issued Alphabet's Google GOOGL.O a warrant to buy a stake worth about $12.18 billion as part of a deal to help develop custom chips for the search giant.

Shares of the custom chipmaker jumped more than 11% in premarket trading, while larger rival Broadcom AVGO.O was down over 3%.

Demand for custom chips such as Google's tensor processing units (TPUs), used for AI workloads, has surged in recent years as businesses seek alternatives to Nvidia's NVDA.O pricey graphics processors.

Marvell said it would develop AI inference accelerators, storage, networking and memory interface controllers and near-memory computing technologies for Google.

In April, Broadcom signed a long-term agreement with Google to develop and supply future generations of custom AI chips and other components for the company's next-generation AI racks through 2031.

(Reporting by Anhata Rooprai in Bengaluru; Editing by Shilpi Majumdar)

((Anhata.Rooprai@thomsonreuters.com))