Global semiconductor leader Marvell Technology announced on December 2 that it has entered into a definitive agreement to acquire U.S. photonic-interconnect startup Celestial AI in a transaction valued at approximately $3.25 billion, marking a major step in Marvell's strategy to expand high-bandwidth, low-latency connectivity solutions for next-generation AI and cloud data centers.

Under the agreement, Marvell will pay $1 billion in cash and issue 27.2 million shares of common stock valued at $2.25 billion based on the recent 10-day VWAP. Celestial AI shareholders may receive up to an additional 27.2 million Marvell shares—worth as much as $2.25 billion—if the company meets future revenue milestones. One-third of the earn-out will be paid if Celestial AI reaches $500 million in cumulative revenue by the end of Marvell's fiscal year 2029, and the full amount will be paid if cumulative revenue exceeds $2 billion.

The transaction is expected to close in the first quarter of calendar year 2026, subject to customary closing conditions and regulatory approvals.

A Major Bet on Photonics as AI Reshapes Data Center Architecture

Founded in 2020, Celestial AI has developed a photonic interconnect platform designed to replace copper-based links inside and between racks, enabling AI accelerators to communicate at significantly higher bandwidth and lower latency. Investors include AMD, Samsung, and Intel CEO Pat Gelsinger, who also serves on the company's board.

Marvell said the acquisition positions it at the forefront of a structural shift in AI infrastructure. As AI workloads grow, next-generation accelerator systems are moving from single-rack to multi-rack distributed configurations, connecting hundreds of XPUs with integrated high-bandwidth, ultra-low-latency fabrics such as UALink. These architectures require specialized interconnects capable of scaling in performance, energy efficiency, and reach—driving a transition toward all-optical connectivity.

"Acquiring Celestial AI is a transformative step that expands our leadership in AI connectivity," said Matt Murphy, Marvell's chairman and CEO. "It broadens our addressable market and accelerates our roadmap to deliver the industry's most complete end-to-end connectivity platform for AI and cloud customers."

Marvell expects Celestial AI's revenue contribution to begin in the second half of fiscal 2028, reaching an annualized run rate of $500 million in the fourth quarter of fiscal 2028 and doubling to $1 billion by the fourth quarter of fiscal 2029.

A Breakthrough Photonic Fabric for Rack-Scale and In-Package Connectivity

Celestial AI's photonic fabric uses an optical interconnect structure that delivers more than 2× the energy efficiency of copper, longer transmission distances, and significantly greater bandwidth. Its architecture also offers nanosecond-level latency and strong thermal stability, enabling reliable operation near multi-kilowatt XPUs and switches.

The company's first photonic fabric chip integrates all required electrical and optical components into a compact package that delivers 16 Tbps of bandwidth—10× the port capacity of today's leading 1.6T electrical solutions. The compact design also supports co-packaging with XPUs and expansion switches, enabling rack-scale connectivity and freeing valuable die-edge real estate for additional HBM capacity.

Beyond XPU-to-XPU expansion, Celestial AI's platform can support future applications such as pooled storage devices and optical chip-to-chip links inside multi-die packages.

Celestial AI CEO and co-founder David Lazovsky said Marvell is the ideal partner to scale the technology: "Marvell has the footprint, customer relationships, and connectivity leadership needed to take our photonic platform into high-volume production."

Strong Market Momentum and Cloud Provider Support

The acquisition follows Marvell's outlook for accelerated growth in its custom chip business, driven by rising demand from hyperscale data-center operators. Marvell expects 20% year-on-year growth in custom silicon revenue next fiscal year, and total company revenue of roughly $10 billion.

Marvell also issued a warrant to Amazon, enabling AWS to purchase up to $90 million—around 1 million shares—of Marvell stock based on its adoption of photonic fabric products through the end of 2030. AWS vice president for compute and machine learning Dave Brown said photonic interconnects will play a critical role in designing scalable, energy-efficient cloud platforms.

Marvell's stock rose around 13% in after-hours trading following the announcement.