Marvell Technology Inc. (NASDAQ:MRVL) could significantly expand its position in AI data-center networking through a rumored acquisition of Lumentum Holdings Inc. (NASDAQ:LITE), giving the chipmaker greater control over critical optical components as the industry shifts toward co-packaged optics.
Counterpoint Research Associate Director Gareth Owen said on Thursday that a potential Marvell acquisition of Lumentum would help the chipmaker protect its position as AI data-center networking shifts from copper toward co-packaged optics.
CPO Shift Creates Strategic Rationale
Owen said Marvell risks losing some DSP demand as optics moves closer to XPUs and switch ASICs. Acquiring Lumentum would give Marvell exposure to optical links that do not use DSPs and broaden its position across AI networking interconnects.
He highlighted Lumentum’s indium phosphide laser fabs as a major strategic asset. Lumentum and Coherent control most global InP capacity, while new fabs take years to build. Because Marvell already buys lasers from Lumentum, owning those facilities could secure access to a scarce component used across AI optical links.
Deal Would Broaden Marvell’s Optical Portfolio
Owen said the deal would also complement Marvell’s silicon portfolio by adding CW and EML lasers, NPO/CPO optics, optical circuit switching and transceiver modules.
He noted that the acquisition would extend Marvell’s photonics strategy following its $5.5 billion Celestial AI acquisition earlier this year.
Vertical Integration Could Strengthen Competition
If completed, Owen said the transaction could make Marvell one of the few suppliers spanning both the electrical and optical sides of AI networking, while simplifying its supply chain and strengthening its position against Broadcom Inc. (NASDAQ:AVGO), Coherent Corp. (NYSE:COHR) and Chinese optical-module vendors.
However, he also flagged potential risks. A transaction of this scale could face regulatory scrutiny because of Lumentum’s role in a strategically important supply chain, while some module vendors that currently rely on Marvell DSPs could shift toward alternatives such as Broadcom or Credo Technology Group Holding Ltd. (NASDAQ:CRDO).
Price Action: Lumentum Holdings shares were down 9.6% at $831.23 and Marvell Technology shares were down 6.9% at $203.30 in early trading on Friday, according to Benzinga Pro data.
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