Key Points
Google obtained the right to buy a $12 billion stake in Marvell as part of a custom silicon partnership.
Marvell will supply the hyperscaler with AI accelerators and related chips.
Shares of Marvell Technology (NASDAQ: MRVL) climbed on Wednesday after the semiconductor designer struck a deal to supply Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) with custom artificial intelligence (AI) chips.
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Partnering with an AI leader
Marvell will help Google develop custom semiconductor products for its cloud infrastructure business and AI operations.
The agreement covers a broad range of silicon products that integrate with Google's tensor processing units (TPUs), the custom-designed chips built specifically to power the cloud-computing giant's machine learning workloads.
That includes chips that accelerate AI inference tasks, manage data flow, and speed up information transfer across networks.
As part of the deal, Google received a warrant to purchase up to 58,970,907 shares of Marvell's stock at an exercise price of $206.58 per share, or roughly $12.2 billion in total.
Wall Street sees more gains ahead for investors
RBC Capital Markets analyst Srini Pajjuri views the deal with Google as "a significant positive" for Marvell. In turn, Pajjuri sees Marvell shares surging more than 50% to $360.
Pajjuri isn't the only Marvell bull on Wall Street. Of the 43 analysts that cover its stock, 38 rate Marvell a buy or strong buy, according to Yahoo! Finance.
It's easy to see why. As a leading designer of high-performance data infrastructure chips, Marvell is well-positioned to cash in on the AI data center boom.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Marvell Technology. The Motley Fool has a disclosure policy.