On Nov. 2, AI-powered fabless semiconductor giant Marvell Technology Inc. MRVL entered into a definitive agreement to acquire photonics major Lumentum Holdings Inc. LITE in an all-stock deal valued at approximately $115 billion.
Every Lumentum stockholder will receive 4.5 Marvel shares, valuing LITE at around $1,132 per share. Post-close, MRVL and LITE shareholders will own 67% and 33% of the combined company, respectively. The deal is expected to close in the first half of 2028.
Lumentum currently carries a Zacks Rank #3 (Hold), while Marvell currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of MRVL and LITE year to date.
Image Source: Zacks Investment Research
Photonics Becomes New Hot Cake in AI Infra Space
Optical and photonics products are in tremendous demand for serving global cloud and AI/ML infrastructure. Large AI models require millions of graphical processing units (GPUs) working in tandem.
As a result, the ecosystem witnesses massive growth in data throughput (as high as 400 Gbps and 800 Gbps). Traditional copper wiring is unable to carry these extremely high-speed data packets properly, as it generates excessive heat slowing down the entire AI compute cluster.
Photonics technology solves this problem by transmitting data at the speed of light through fiber-optic network. Photonics enables high-speed, low-latency and energy-efficient data transfer without overheating.
Huge Synergies Likely From the Deal
The deal is targeting a $550 billion total addressable market and over $1 billion in cost synergies for the combined entity. None of the four giant AI hyperscalers trimmed their massive AI capex plan for 2026 and beyond in their last reported earnings results.
Marvell is benefiting from AI-led demand across the data center end market, with custom silicon, interconnect, switching and optics driving record revenues. MRVL’s custom silicon strategy continues to benefit from hyperscaler demand for differentiated XPU and XPU-attach solutions.
On the other hand, Lumentum provides components, such as transceivers and lasers for fiber-optic networks, supporting the rapid growth of AI, cloud computing, 5G connectivity, and beyond. LITE’s technology leadership in high-speed optical components has positioned it as an essential supplier to hyperscale customers deploying next-generation network architectures.
The proposed acquisition will position Marvel as a formidable player in the optical technologies and laser manufacturing space. The combined entity will enable MRVL to more rigorously compete with its closest rival — Broadcom Inc. AVGO — that offers customers a broader menu of AI data center hardware in one platform.
Deepening NVIDIA Ecosystem Integration
The expanded partnership with NVIDIA Corp. NVDA ties MRVL’s roadmap more directly to next-generation AI system architecture. The collaboration spans optics, NVLink Fusion integration and AI-RAN, widening the platforms where Marvell silicon can participate.
In March 2026, Marvell issued $2 billion of Series A Convertible Preferred Stock to NVIDIA as part of the strategic relationship. Likewise, Lumentum has a strong collaboration with NVIDIA for developing NVDA’s silicon photonics ecosystem, especially for deploying the latter’s Spectrum-X Photonics networking switches. NVDA also invested $2 billion in LITE in March 2026.
Solid Estimate Revisions
Marvell has an expected revenue and earnings growth rate of 47.1% and 48.2%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.7% over the last 60 days.
MRVL has an expected revenue and earnings growth rate of 65.8% and 74.8%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 9.2% over the last 30 days.
Image Source: Zacks Investment Research
Lumentum has an expected revenue and earnings growth rate of more than 100% each, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.5% over the last 30 days.
LITE has an expected revenue and earnings growth rate of 60.5% and 64%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 3.8% over the last 30 days.
Image Source: Zacks Investment Research
Robust Price Upside for MRVL
Despite an enormous rally in the stock price year to date, Marvell is currently trading at a huge 48% discount to its 52-week high price. The short-term average price target of brokerage firms represents an increase of 98% from the last closing price of $171.41. The brokerage target price is currently in the range of $220-$450. This indicates a maximum upside of 162.5% and no downside.
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Marvell Technology, Inc. (MRVL): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).