Marvell Technology Inc. (MRVL) is making a big bet on the future of AI infrastructure, and it's willing to shell out billions to get there. The networking chip giant is reportedly in advanced talks to acquire Celestial AI, a photonics startup that's caught the attention of some major players in the semiconductor world.

According to a report from the Information published Tuesday, the deal is structured as a cash-and-stock transaction worth more than $5 billion. That figure includes potential earnouts tied to hitting specific product milestones, which is a pretty standard way to bridge valuation gaps when you're buying a company that's still proving out its technology. Sources familiar with the negotiations say an announcement could come as soon as Tuesday.

MarketDash reached out to Marvell's investor relations team for comment but hasn't received a response yet.

Why Celestial AI Matters

So what exactly is Marvell buying? Celestial AI develops photonics technology that speeds up communication between AI compute chips and memory. That might sound technical, but it's actually addressing one of the biggest bottlenecks in modern AI systems. As AI models get bigger and more complex, moving data around efficiently becomes just as important as raw computing power.

For Marvell, which competes with Broadcom Inc. (AVGO) in custom silicon and datacenter infrastructure, this acquisition would expand its portfolio in a pretty meaningful way. The company currently has a market cap of $78.5 billion and has been pushing hard into AI hardware as hyperscalers build out their infrastructure.

The Backing Behind Celestial AI

Here's where things get interesting: Celestial AI has raised $515 million to date, including a hefty $250 million funding round in March. That round was backed by an investment arm of Advanced Micro Devices Inc. (AMD), which tells you something about how seriously the big chipmakers are taking this technology.

And the connections don't stop there. Intel Corp. (INTC) CEO Lip-Bu Tan serves on Celestial AI's board. When you've got executives from AMD and Intel involved, you know the startup is working on something that matters to the broader industry.

Can Marvell Afford This?

The obvious question with a $5 billion deal is whether Marvell has the financial firepower to pull it off. The company held $1.22 billion in cash and equivalents as of August 2, 2025, which means a significant portion of this deal will likely be stock. That's pretty typical for acquisitions of this size.

It's worth noting that Marvell stock has had a rough year, down 18% year-to-date. The company has missed revenue consensus estimates in at least two of the last four quarters and failed to hit analyst EPS expectations in at least one of those quarters. That performance puts some pressure on management to show that this acquisition can deliver real value.

Earnings on Deck

Timing-wise, this deal news comes right before Marvell reports its third-quarter results on Tuesday, December 2, after the market closes. Analysts are generally optimistic about what they'll see.

JPMorgan's Harlan Sur expects the company to meet or slightly beat earnings estimates and guide January-quarter revenue above consensus. He's pointing to strong datacenter momentum, including ramps in Trainium and Maia ASIC production along with robust optical demand.

Rosenblatt's Kevin Cassidy is also forecasting a slight earnings beat, citing continued strength in both AI and non-AI optical markets. He notes that improving Custom IC trends in the second half of the year could help calm investor concerns about whether Marvell is gaining traction in key markets.

Whether this acquisition goes through or not, it's clear that Marvell is serious about competing in the AI infrastructure space. Photonics technology represents one potential path to solving the data movement challenges that come with building massive AI systems, and grabbing Celestial AI would give Marvell a meaningful edge in that race.

MRVL Price Action: Marvell Technology shares were up 1.37% at $92.35 during premarket trading on Monday.