Marvell and Google signed an expanded commercial agreement on July 29 to develop custom artificial intelligence silicon. The warrant, issued August 18, would allow Google to buy up to $12.2 billion in shares of the chipmaking company. The tech giant will have the right to purchase up to 58,970,907 shares at $206.58 apiece, with the stake tied to purchasing targets through the 2033 fiscal year.
Roughly 1.36 million shares vest on a times basis over the first year, while remaining shares vest in 240 tranches. If Google hits the targets its stake option depends on, it could bring in roughly $120 billion in revenue through fiscal 2033. Discussing the expanded agreement, UBS analyst Timothy Arcuri raised the price target on Marvell Technology Inc. (NASDAQ: MRVL) to $310.00 (from $300.00) while maintaining a Buy rating. The firm is positive that the expanded Google opportunity could back substantial long-term revenue and EPS, but how much of the $120 billion figure is real is something worthy of discussion.
The Bull Case
Broadcom Inc. (NASDAQ:AVGO) shares plunged Wednesday after Alphabet Inc.’s (NASDAQ:GOOGL) Google and Marvell announced the expanded agreement, with investors worrying that the deal threatens Broadcom’s position as Google’s primary custom silicon and Tensor Processing Unit partner.
Cathie Wood’s ARK Invest picked up Broadcom stock on the dip, purchasing 55,548 shares worth over $20 million. The buy suggests what UBS also backs, Marvell isn’t building a competing version of the TPU, and Google is already clearly working with other XPU/ XPU attach suppliers. Analyst Timothy Arcuri noted how AVGO has shown little interest in the XPU market anyway. This in turn implies how Marvell doesn’t need to displace AVGO for the investment thesis to work.
In simpler words, Marvell is getting a slice of the bigger pie, not eating someone else’s.
The agreement also allows Marvell to become a custom AI chip partner for all three major hyperscalers: Amazon, Microsoft, and now Google. So, Marvell didn’t just grab another deal, it completed a hyperscaler sweep.
Behind the $120 Billion Figure
The $120 billion figure is the hot topic right now. However, UBS’s analyst note already flags the risk: the $120 billion figure is a warrant vesting ceiling. It’s neither a commitment, nor a revenue forecast. While Google may become Marvell’s fifth-largest shareholder if the warrants fully vest, the tech giant won’t receive those shares upfront.
Instead, the warrant is largely tied to Google’s future purchases of Marvell’s custom silicon through fiscal 2033, effectively making the equity compensation dependent on Marvell generating revenue from the partnership.
In essence, Google gets more Marvell stock when Marvell gets more Google business.
While Marvell’s hedge fund count fell in Q1 from 85 to 79, recent institutional filings show D.E. Shaw boosting its MRVL stake by 658% in Q2 to 2.50 million shares, while Ariose Capital opened a new 74,400-share position worth about $22 million.
Most of This Sits Past 2028
The headline numbers fail to flag something UBS has noted in their analysis: most of this opportunity sits beyond the 2028 timeframe. This is due to the design cycle times for new custom silicon programs need to reach full ramp. Therefore, the bulk of the $120 billion is likely a beyond 2028 story, not a near-term one. UBS’s own C2028 EPS estimate of $10.31 is a reflection of partial contribution from the deal.
Verdict
Overall, the deal is a genuine structural positive for both Marvell and Google, with Marvell’s partnership with all three major hyperscalers a strong diversification story. However, the $120 billion figure from this recent deal is more of a maximum-scale framework instead of a forecast. More importantly, most of this figure is likely to show up in actual revenue past the 2028 window and that too, not certainly.
While we acknowledge the risk and potential of MRVL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MRVL and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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