SANTA CLARA, California: Marvell Technology has agreed to buy optical components maker Lumentum in a US$115 billion all-stock deal, including debt, making one of the biggest acquisitions of 2026 as the chipmaker expands its bet on the artificial intelligence data-center boom.

The transaction values Lumentum's equity at $102.54 billion and strengthens Marvell's push into optical connectivity as it competes with larger rival Broadcom.

"AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation," said Marvell CEO Matt Murphy, who will remain chairman and CEO of the combined company.

"We intend to help shape the next era of AI connectivity and create exceptional stockholder value."

Lumentum shares fell more than 10 percent in early trading on November 2, while Marvell dropped more than 5 percent. Both stocks have fallen sharply since reports of deal talks emerged late last month amid concerns about an AI investment bubble.

By acquiring Lumentum, a company roughly half its size, Marvell is betting that heavy spending by Big Tech on artificial intelligence will continue to drive demand for optical components used to move data at high speeds.

Lumentum makes photonic products, including high-performance lasers and optical components used in AI, cloud computing and communications networks.

Nvidia invested $2 billion each in Marvell and Lumentum earlier this year. Nvidia is also a major backer of optical connectivity technology as data centers become larger and more complex.

"Combining Marvell's custom chips and networking expertise with Lumentum's optical components could give it a much stronger hand as data centers demand ever-faster, more energy-efficient connections," said Axel Rudolph, chief technical analyst at IG Group.

"But this is an enormous bet, and investors are right to ask whether Marvell is paying too much and taking on too much at once."

The acquisition could also strengthen Marvell's position against Broadcom, which has long been Google's main custom-chip partner and offers customers a broader range of AI data-center hardware.

Under the agreement, Marvell will pay $1,132 per Lumentum share, representing a 23.9 percent premium to Lumentum's last unaffected closing price on October 28.

Lumentum shareholders will receive 4.5 Marvell shares for each share they own and will hold roughly 33 percent of the combined company. Marvell shareholders will own the remainder.

Both boards unanimously approved the transaction, which is expected to close in the first half of 2028.

Marvell said the acquisition would expand the combined company's total addressable market to $550 billion.

The company will pay Lumentum a $5.8 billion termination fee if its board withdraws support for the transaction or Marvell walks away to accept a takeover offer. Lumentum would owe Marvell $2.9 billion in similar circumstances, while Marvell would pay $3.2 billion if regulators block the deal.

Marvell has already expanded its photonics business this year, closing its $3.5 billion acquisition of Celestial AI in February as growing use of AI agents and chatbots increases demand for faster optical links connecting chips in data centers.

Marvell's annual revenue has risen from $3 billion in fiscal 2021 to $8.2 billion in fiscal 2026. The Lumentum transaction would be its largest acquisition since its $10 billion purchase of Inphi in 2021.