Marvell Technology, Inc. (NASDAQ:MRVL) has expanded its partnership with Google to develop custom chips for AI infrastructure, strengthening its position in the growing custom-silicon market. The agreement covers several areas linked to Google’s Tensor Processing Unit ecosystem, including AI inference accelerators, storage and networking products, memory interface controllers, and near-memory computing.

Alongside the commercial agreement, Marvell issued Google a warrant to buy up to 58.97 million Marvell shares at $206.58 each. If fully exercised, the warrant would be worth about $12.18 billion. The headline figure is important, but it needs some context because Google is not committing $12.18 billion upfront. Most of the warrants will vest only as Marvell generates revenue from Google over the coming years.

Investors reacted strongly to the news, with Marvell Technology, Inc. (NASDAQ:MRVL) shares gaining more than 11% in premarket trading. Broadcom, Google’s existing custom-chip partner, fell more than 2%.

Bull Case: A Long-Term Growth Opportunity

The most important part of the deal may be the way the warrant is structured. Most of the shares are linked to actual revenue from Google rather than simply vesting over time. That gives investors a fairly clear way to track how the relationship develops.

Every $500 million in qualifying revenue allows another tranche to vest. If Marvell continues winning business from Google, more of the warrant becomes valuable. If the revenue does not materialize, much of the warrant may never vest. In that sense, the agreement creates a direct link between Google’s spending on Marvell’s products and the potential value of the warrant.

The deal also gives Marvell a larger role in a market that is becoming increasingly important to major cloud companies. Google, Amazon, and other hyperscalers are investing heavily in custom chips as they look for ways to build AI infrastructure that is better suited to their own workloads and less dependent on general-purpose GPUs.

Google’s continued investment in its TPU ecosystem fits directly into this trend. The fact that Marvell will work on areas such as memory controllers and near-memory computing suggests the relationship goes beyond a single chip program and could develop into a broader role within Google’s AI infrastructure.

There is also a useful precedent. In December 2024, Marvell reached a similar warrant agreement with Amazon Web Services covering 4.18 million shares at an exercise price of $87.78. That warrant was also linked to revenue generated from AWS and remains tied to performance through January 2030.

The Google agreement is much larger. The potential share count is more than 14 times the size of the AWS warrant, while the exercise price is also substantially higher. That difference suggests the potential scale of the Google relationship is considerably greater.

Marvell Technology, Inc. (NASDAQ:MRVL) was already positioned for strong growth in AI infrastructure before this announcement. The company has previously targeted more than $10 billion in custom-chip revenue by fiscal 2029 and expects data-center revenue to grow by roughly 50% this year. If those targets are achieved, the Google agreement could strengthen an existing growth story rather than create an entirely new one.

The deal could also improve Marvell’s position against Broadcom. Broadcom already has a long-term relationship with Google covering custom TPU development and networking through 2031. Google’s decision to expand its work with Marvell alongside Broadcom suggests that the company is willing to use multiple suppliers as its AI infrastructure requirements grow. For Marvell, gaining a larger share of Google’s spending could become a meaningful source of revenue over several years.

The $12.18 Billion Figure Can Be Misleading

The biggest risk is that investors may focus too heavily on the $12.18 billion headline figure. That amount represents the maximum potential value of the warrant, not a guaranteed investment by Google.A

Most of the shares will only vest when Marvell Technology, Inc. (NASDAQ:MRVL) generates enough qualifying revenue. If Google’s purchases remain below the required thresholds, a significant portion of the warrant could expire without being exercised.

Competition is another concern. Broadcom already has a significant relationship with Google and is involved in Google’s custom TPU development and AI networking. Marvell still has to prove that it can win additional business on the basis of technology, pricing, manufacturing capacity, and execution.

Winning a custom-chip contract is also not the same as generating strong profits from it. Marvell Technology, Inc. (NASDAQ:MRVL) will need to move from development and design wins to large-scale production while maintaining attractive margins. That process can require significant investment, and revenue growth does not automatically translate into equivalent growth in earnings.

There is also a risk that the stock has already priced in much of the good news. An 11% premarket jump shows that investors are expecting the Google relationship to become a meaningful growth driver. That creates a higher bar for Marvell in the quarters ahead.

Conclusion

The Google agreement is a meaningful development for Marvell Technology, Inc. (NASDAQ:MRVL) because it gives the company a broader role in Google’s AI infrastructure while potentially creating a substantial source of custom-chip revenue through 2033.

The $12.18 billion warrant should not be treated as a guaranteed investment. Its value depends largely on how much business Google ultimately gives Marvell. That is also what makes the structure interesting for investors: the revenue-linked vesting provides a clear way to measure whether the partnership is actually delivering.

The biggest positives are Google’s growing AI infrastructure needs, Marvell’s expanding custom-silicon business, and the potential for the company to take a larger share of hyperscaler spending. The main risks are competition from Broadcom, execution challenges, shareholder dilution, and the possibility that the market has already priced in strong growth.

Overall, the deal strengthens the long-term bull case for Marvell, but investors should focus less on the $12.18 billion headline and more on the actual revenue Marvell generates from Google. The progress toward those $500 million revenue milestones will be the clearest indication of whether this becomes a major long-term growth driver for the company.

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Disclosure: None. This article is originally published at Insider Monkey.