The $12 Billion Deal: Google Changes the Rules of the Game
A new strategic move by the tech giant in the field of artificial intelligence chips is making waves in the market and boosting the stock of a surprising partner by 11%, while a major competitor is seeing declines.
Tech giant Google is expanding its collaboration with chip company Marvell Technology in a strategic move designed to strengthen its artificial intelligence (AI) infrastructure and reduce dependence on key market suppliers. As part of the agreement, the two companies will develop custom chips that will connect to Google's AI processors, known as TPUs.
According to a Reuters report published on Tuesday, the agreement includes the development of advanced hardware components for Google's AI systems. The chips will include accelerators for AI tasks, storage controllers, communication and network components, memory controllers, and near-memory computing technologies.
One of the most notable components of the deal is an option granted by Marvell to Google. Under the agreement, originally signed at the end of July, Google will be able to purchase up to 58.97 million shares of Marvell at an exercise price of $206.58 per share. The value of the options could reach approximately $12.2 billion.
The agreement includes a mechanism that links the volume of Google's purchases to the vesting of the options. A small portion, including about 1.36 million shares, is expected to vest during the first quarters of the first year of the agreement. The remaining options will vest in accordance with future purchases of Marvell products.
Starting from the third quarter of 2027 until 2033, for every $500 million that Google spends on purchasing products from Marvell, one portion out of 240 equal option portions will vest. This structure creates a direct link between Marvell's future revenues and Google's incentive to continue purchasing chips from it over the years.
Investors reacted quickly to the announcement. Marvell's stock jumped by more than 11% in pre-market trading, while the stock of Broadcom, considered Google's primary partner in the development of TPU processors, fell by more than 3%.
The market reaction reflects the broad significance of the deal. Google is signaling its intent to expand its circle of suppliers and reduce dependence on a single factor at a time when the demand for AI infrastructure continues to grow rapidly.
The move fits into a broader trend in the technology industry, as giant companies develop dedicated chips tailored to their needs instead of relying only on off-the-shelf solutions. Parallel to Nvidia's dominance in the GPU processor market, cloud giants are looking for ways to develop hardware that will allow them to improve performance and manage infrastructure and energy costs.
In fact, the deal is not limited to a chip supply contract. It creates a long-term partnership in which the economic interests of both companies are connected, and marks the growing struggle for control over the hardware infrastructure on which the AI industry will be based in the coming years.
