Semiconductor developer Marvell Technology is in advanced negotiations to acquire optical technology provider Lumentum Holdings, a deal that would expand the chipmaker’s AI networking business by adding laser manufacturing and optical communications technology.

The companies could announce an agreement as early as next week, according to Bloomberg News, which cited people familiar with the discussions. Lumentum has a market value of approximately $83 billion, making the potential acquisition one of the tech industry’s largest.

Neither company has confirmed the negotiations, and the purchase price remains undisclosed. A transaction could involve stock, though the terms remain uncertain and negotiations could still fail.

The proposed acquisition comes as Marvell expands its AI business. The company recently raised its fiscal 2028 revenue forecast from $15 billion to $20 billion, indicating strong demand for its custom AI processors and networking chips. Marvell’s shares have nearly tripled in 2026, providing the company with a stronger position to finance acquisitions through stock.

But investors appear concerned about the potential costs. Following reports of the negotiations on October 28, Marvell shares declined 8.44% in after-hours trading, while Lumentum gained 8.64%.

Marvell’s potential acquisition highlights that networking capacity and component supply offer as much competitive edge as the chips themselves. The deal could also raise questions among competing chipmakers and optical equipment customers about continued access to Lumentum products.

High Demand for Optical Technology

Lumentum develops lasers, optical transceivers and related components that transmit data using light rather than electrical signals. These technologies are becoming crucial as data centers deploy larger clusters of GPUs for AI training and inference. Lumentum could provide Marvell with additional technology needed to transfer massive volumes of data between processors while reducing network bottlenecks.

Lumentum’s manufacturing capacity has been under pressure. Lumentum CEO Michael Hurlston recently said that its optical components are sold out through early 2029. For certain products, the company expects to leave approximately 70% of customer demand unmet next year.

To expand production, Lumentum plans to invest at least $350 million in manufacturing facilities in Japan, including those producing indium phosphide components used in optical communications. The strong demand has supported remarkable revenue growth. Lumentum reported fiscal fourth-quarter 2026 revenue of $1.006 billion, up 109.3%, while annual revenue climbed 83.2% to $3.01 billion.

Expanding AI Networking Portfolio

Marvell already purchases lasers from Lumentum, so an acquisition would bring an existing supplier into its business while broadening its optical technology capabilities.

The proposed purchase would build on Marvell’s $3.25 billion acquisition of Celestial AI, announced in December 2025 and completed in February 2026. That transaction, which could reach $5.5 billion if performance milestones are achieved, gives Marvell access to photonic interconnect technology geared for high-speed communications between processors.

Combining Celestial AI’s technology with Lumentum’s optical components could allow Marvell to supply more of the hardware required for AI networking, including custom silicon, photonic connections and laser technology. Marvell also works with Microsoft, Amazon Web Services and Google on custom silicon and related infrastructure.

Bernstein analysts have warned that financing a transaction of this size could pose challenges, particularly as Marvell integrates Celestial AI. Marvell reported approximately $3.92 billion in cash and equivalents at its latest quarter-end, far below Lumentum’s market valuation.

Another consideration is NVIDIA’s investment in Lumentum. In March, NVIDIA invested $2 billion through convertible preferred shares as part of an optical technology partnership.