Semiconductor company Marvell announced on Tuesday that it will be acquiring Celestial AI for at least $3.25 billion in cash and stock. The purchase price could increase to $5.5 billion if Celestial hits revenue milestones, Marvell said, according to CNBC. Marvell shares rose 13% in extended trading Tuesday as the company reported third-quarter earnings that beat expectations and said on the earnings call that it expected data center revenue to rise 25% next year.
This deal allows Marvell to acquire complimentary technology for its semiconductor networking business. With the addition of Celestial AI, Marvell will be able to sell more chips and parts to companies committed to spending an increasing amount on AI.
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Celestial is a startup focused on developing optical interconnect hardware, which it calls a “photonic fabric,” to connect high-performance computers. Celestial was reportedly valued at $2.5 billion in March in a funding round, and Intel CEO Lip-Bu Tan joined the startup’s board in January.
Advanced AI systems need optical connections to tie together dozens or hundreds of chips so they can work as one to train and run the biggest large-language models. Currently, many AI chip connections are done using copper wires, but newer systems are increasingly using optical connections because they can transfer more data faster and enable physically longer cables.
“This builds on our technology leadership, broadens our addressable market in scale-up connectivity, and accelerates our roadmap to deliver the industry’s most complete connectivity platform for AI and cloud customers,” Marvell CEO Matt Murphy said in a statement. Marvell also said that the first application of Celestial technology would be to connect a system based on “large XPUs,” which are custom AI chips usually made by the companies investing billions in AI infrastructure.
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The company also said that it could even integrate Celestial’s optical technology into custom chips, and based on customer traction, the startup’s technology would soon be integrated into custom AI chips and related parts called switches.
Murphy called the acquisition “a transformative step in Marvell’s evolution,” and said it “expands our leadership in AI connectivity, as scale-up becomes the next frontier in AI infrastructure.”
Amazon Web Services Vice President Dave Brown said in a statement that Marvell’s acquisition of Celestial will “help further accelerate optical scale-up innovation for next-generation AI deployments. The maximum payout for the deal will be triggered if Celestial can record $2 billion in cumulative revenue by the end of fiscal 2029. The deal is expected to close early next year.