Marvell Technology is in advanced talks to acquire optical-components maker Lumentum, according to Bloomberg and Reuters, in what could become one of the technology industry’s largest acquisitions. A deal could be announced as soon as next week, but neither company has confirmed an agreement and the negotiations could still collapse.

The potential transaction, reported Wednesday, October 28, and followed by market reaction Thursday, would combine Marvell’s custom chips and network processors with Lumentum’s lasers and optical interconnect technology. Bloomberg reported the companies were discussing an all-stock transaction. Lumentum’s roughly $85 billion market capitalization is a measure of its stock-market value, not an agreed purchase price.

Lasers are becoming critical to AI infrastructure

As artificial intelligence clusters grow, moving information between processors and racks requires higher-bandwidth connections with manageable energy use. Optical links carry data using light, and Lumentum supplies laser components used in these systems. Marvell develops connectivity chips and digital-signal processors that help move and recover data across high-speed connections.

Lumentum has been showcasing external lasers for co-packaged optics and high-density optical connections inside AI racks. In a September product announcement, it detailed an eight-wavelength laser module designed to support next-generation optical computing interconnects, with initial availability expected in 2027.

The proposed combination would build on Marvell’s previous push into photonics, including its announced $3.25 billion Celestial AI acquisition. BitcoinVersus.Tech has covered Lumentum’s optical rack connectivity efforts and Marvell’s high-capacity networking silicon.

The size of the deal is a concern

Investors are weighing whether buying a laser supplier at a premium would strengthen Marvell’s AI networking position enough to justify the cost. Reuters Breakingviews warned that a rich valuation could make the return on an acquisition difficult to justify. Marvell shares fell sharply Thursday as Lumentum traded higher, reflecting different assessments of the reported talks.

Lumentum’s own demand outlook adds to the strategic appeal. Its chief executive has said manufacturing capacity for key optical products is already committed well into 2029. However, strong present demand does not guarantee future margins, and a merger could raise financing, regulatory and customer-relationship questions.

For now, the central unanswered questions are whether the companies sign an agreement, the actual consideration and financing, and whether a combination would improve the supply of optical components for AI data centers. No transaction terms have been formally announced.

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