Marvell Technology announced Monday it has agreed to acquire optical components maker Lumentum Holdings in an all-stock transaction with an implied enterprise value of $115 billion, marking one of the semiconductor industry's most significant artificial intelligence infrastructure bets in 2026.

Deal Creates Category Leader in AI Connectivity

Under the terms of the agreement, Lumentum shareholders will receive 4.5 Marvell shares for each Lumentum share they own, representing approximately $1,132 per Lumentum share and a premium of roughly 23.9 percent based on each company's closing price on October 28, the last trading day before market speculation regarding the transaction surfaced.

"We need scale-up technology that needs semiconductors and optical working seamlessly together," Marvell CEO Matt Murphy told CNBC's "Squawk on the Street." "We are going to create a new category of company here." Through the acquisition, Marvell aims to combine electrical and optical technologies to meet accelerating artificial intelligence connectivity demands across data center regions and systems.

Lumentum CEO Michael Hurlston emphasized the "enormous" opportunity the combination creates to address growing connectivity requirements from the AI infrastructure buildout. Companies increasingly rely on optical connections to link chips used for training and running large language models, creating surging demand for integrated solutions.

Market Reaction Reflects Deal Uncertainty

Marvell shares slumped 13 percent in Monday trading, while Lumentum's stock sank nearly 19 percent, despite both companies being major winners in the broader artificial intelligence boom. Prior to Monday's sell-off, Marvell had more than doubled over the past year, while Lumentum quadrupled during that stretch. The significant declines suggest investor concerns about execution risks and integration challenges inherent in such a massive transaction.

Since the deal uses a fixed-ratio structure with no cash component, the final value will depend on Marvell's share price at closing. The transaction is expected to close during the first half of 2028, subject to regulatory approvals and customary closing conditions.

Building on Prior AI Investments

The Lumentum acquisition represents Marvell's latest major commitment to artificial intelligence infrastructure growth. Earlier in 2026, the company closed a multibillion-dollar deal for Celestial AI, a startup focused on optical interconnectivity technology. Murphy dismissed concerns about Nvidia's circular dealmaking patterns, noting the leading AI chipmaker's recent multibillion-dollar investments in both Marvell and Lumentum.

The transaction comes despite recent market jitters over the long-term sustainability of artificial intelligence infrastructure spending. Marvell's leadership clearly believes optical and photonic technologies will play an essential role powering the networks and cloud computing systems underpinning next-generation AI applications.

Wilson Sonsini Goodrich & Rosati advised Marvell on the transaction, while financial and legal advisors for Lumentum were not immediately disclosed.