Marvell Technology has agreed to acquire Celestial AI, a pioneer in photonics interconnect technology, for $3.25 billion ($1 billion in cash and $2.25 billion in stock). The deal is expected to close in the first quarter of 2026.
This acquisition targets a critical bottleneck in AI data centers: high-speed, low-power connections. Celestial AI's core technology uses light signals instead of electrical ones, offering over twice the energy efficiency of traditional copper interconnects. Its initial photonics chip delivers 16Tbps of bandwidth per die—ten times the capacity of current mainstream 1.6T ports—making it ideal for connecting AI and memory chips.
The move strengthens Marvell's position to compete more effectively with Broadcom and Nvidia in the AI infrastructure market. Marvell forecasts that Celestial AI will begin generating significant revenue in the second half of fiscal 2028, reaching a $500 million annualized run rate by Q4 FY2028 and doubling to $1 billion by Q4 FY2029.
Marvell reported strong results for its third fiscal quarter (ending Nov. 1), with revenue reaching $2.07 billion, a 36.8% year-over-year increase. However, its stock has declined over 15% this year amid broader market concerns and fell another 6% in after-hours trading following the acquisition announcement.
Celestial AI's photonics technology offers nanosecond-level latency and excellent thermal stability, capable of operating reliably in extreme, multi-kilowatt XPU environments. Its potential applications include full-optical lateral scaling interconnects, memory pooling, and replacing electrical links in multi-chip packages.
As AI workloads drive data centers toward multi-rack architectures, optical connectivity is becoming essential. Marvell plans to combine its expertise with Celestial AI's tech to build next-generation, high-bandwidth, low-power connectivity solutions.
ICgoodFind: This acquisition underscores the strategic pivot toward photonics as a foundational technology for next-generation AI infrastructure, intensifying competition in the data center chip market.
