Marvell Technology has reached a definitive agreement to acquire optical interconnect pioneer Celestial AI in a transaction valued at approximately $3.25 billion upfront, marking one of the most significant strategic moves in the rapidly evolving AI data center sector.
The acquisition positions Marvell to expand its footprint in scale-up connectivity as hyperscalers and infrastructure providers shift to architectures that require high-bandwidth, ultra-low-latency optical communication across systems, racks, and packages.
AI system designs are evolving from isolated rack-level deployments to expansive multi-rack clusters comprising hundreds of XPU nodes connected by integrated, any-to-any scale-up fabrics. These next-generation architectures require each XPU to directly access memory across the cluster while maintaining strict power-efficiency, latency, and bandwidth constraints. Industry momentum has steadily shifted toward all-optical interconnects to meet the demands of multi-rack architectures that copper-based links can no longer support.
With Celestial AI’s Photonic Fabric technology, Marvell expects to address a new and substantial semiconductor market segment focused on high-performance optical interconnects. The company believes that combining its expertise in scale-out and scale-across connectivity with Celestial AI’s platform will create one of the most comprehensive connectivity portfolios available to data center customers.
Celestial AI’s Photonic Fabric platform was designed to replace electrical connections within the rack, system, and package by delivering high-bandwidth, low-latency, and power-efficient optical communication. Its architecture provides more than twice the power efficiency of copper and significantly longer reach, while maintaining nano-second-class latency and strong thermal stability. The thermal attributes enable the technology to operate reliably in the intense heat generated by multi-kilowatt XPUs and switches, allowing co-packaged integration in compact 3D architectures. This design frees the die-edge area inside XPU packages, enabling higher HBM capacity.
The company’s first-generation Photonic Fabric chiplet integrates all necessary optical and electrical components and delivers 16 terabits per second of bandwidth, which represents a tenfold improvement over today’s 1.6T ports used in scale-out environments. Multiple chiplets can be co-packaged with XPUs and scale-up switches, substantially expanding total system bandwidth. The platform is already engaged with several major hyperscalers preparing next-generation optical scale-up architectures.
Marvell projects that Celestial AI will generate meaningful revenue starting in the second half of fiscal 2028, reaching a $500 million annualized run rate in the fourth quarter of that year and rising to $1 billion by the end of fiscal 2029. In addition to scale-up connectivity, the technology could support future applications, including pooled memory appliances and optical replacements for conventional electrical die-to-die interfaces.
Under the terms of the agreement, Marvell will pay $1.0 billion in cash and issue approximately 27.2 million shares, valued at $2.25 billion based on the specified 10-day VWAP. Celestial AI shareholders may earn up to an additional 27.2 million shares, valued at up to $2.25 billion, upon achieving revenue milestones that include $500 million in cumulative revenue by the end of fiscal 2029 for partial earnout credit and more than $2.0 billion for full earnout consideration. Closing is expected in the first quarter of calendar 2026, pending regulatory approvals and customary conditions.
Support: Advisors on the transaction include Wilson Sonsini Goodrich & Rosati and Citi for Marvell, and Latham & Watkins and Morgan Stanley for Celestial AI.
KEY QUOTES:
“The acquisition of Celestial AI is a transformative step in Marvell’s evolution and expands our leadership in AI connectivity, as scale-up becomes the next frontier in AI infrastructure. This builds on our technology leadership, broadens our addressable market in scale-up connectivity, and accelerates our roadmap to deliver the industry’s most complete connectivity platform for AI and cloud customers.”
Matt Murphy, Chairman and CEO of Marvell
“AI infrastructure is transforming faster than ever, and the future demands scale-up fabrics that deliver unprecedented bandwidth, power efficiency, and reach. By combining our UALink scale-up switch roadmap and Celestial AI’s breakthrough optical scale-up interconnect, we will enable customers to build AI systems that scale beyond the limits of copper and redefine what’s possible in AI data center architecture.”
Sandeep Bharathi, President, Data Center Group, Marvell
“At AWS, we aim to be at the forefront of major technology inflections, and we believe optical interconnects will play an important role in the future of AI infrastructure. Building a scalable, high-performance, and power-efficient cloud starts with an approach built upon differentiated technologies. Celestial AI has made impressive progress, and we expect their combination with a large-scale semiconductor company like Marvell will help further accelerate optical scale-up innovation for next-generation AI deployments.”
Dave Brown, Vice President of Compute and Machine Learning Services, AWS
“Marvell is the ideal home for our Photonic Fabric, with the scale, customer relationships, and connectivity leadership to take this platform into high-volume production. Together with Marvell’s scale-up switching strategy, we’re excited to accelerate the transition to optical scale-up interconnect and expand what next-generation AI infrastructure can achieve.”
David Lazovsky, Co-Founder and CEO of Celestial AI
