Commentary: Marvell's Lumentum deal holds a lesson for smartphone makers on supply chain integration

Lumentum (LITE) dropped 15% as Marvell (MRVL), which is acquiring it, fell due to an AI chip selloff. The deal, set to close in 2028, values Lumentum at 4.5 Marvell shares per Lumentum share, with no price protection. Other optical stocks like Ciena (CIEN) and Credo (CRDO) also declined. Lumentum's CEO stated its parts are sold out through early 2029, with analysts predicting significant EPS growth.

Marvell Technology (MRVL) fell 14% today, extending losses from a post-election AI selloff. The decline impacts its pending acquisition of Lumentum, as the offer is denominated in MarvL shares. Analysts expect Marvell's normalized EPS to more than double by 2028. The next test is Marvell's third-quarter report in December.

Marvell Technology will acquire Lumentum in an $115B all-stock deal, including Lumentum's debt. The transaction values Lumentum at $1,132 per share, a 23.9% premium. Post-merger, Marvell shareholders will own 67% of the combined company, expanding its addressable market to $550B. The deal aims to leverage Lumentum's optical tech expertise and Marvell's AI infrastructure strengths. Marvell reported $2.7B in Q2 2027 revenue, up 37% YoY, driven by data center demand.

Chipmakers and memory stocks fell sharply on Thursday, with Micron down 12%, Nvidia 6%, AMD 13.5%, and Intel 8%. SanDisk, TSMC, and Marvell also saw significant declines. Qualcomm dropped 10% after its earnings per share forecast missed expectations, despite strong revenue guidance. Investors fear data center restrictions under Democratic control may slow semiconductor demand.

Sandisk led declines among AI-linked stocks, dropping 10.56%, with other companies like SK hynix, Micron, and Marvell also falling. Crypto-related stocks showed mixed performance, with Coinbase and Strategy rising, while Bitdeer and Circle declined.

Marvell Technology will acquire Lumentum in an all-stock deal valued at $115 billion. Lumentum shareholders will receive 4.5 Marvell shares per share, a 23.9% premium. The combined company aims to supply optical interconnect technologies for AI data centers. The deal is expected to close in the first half of 2028, pending approvals. Marvell's CEO assured existing supply models will be maintained.