Marvell grants Google 7% warrant in $12.2 billion custom chip deal

Google's chip budget has become valuable enough that suppliers will hand over ownership stakes to win it.

Marvell Technology issued Alphabet's Google a warrant for 58,970,907 shares — roughly 7 percent of the chipmaker — at $206.58 apiece, tying Google's equity stake to its discretionary purchases of custom AI silicon built around its in-house TPU chips.

"Google's chip budget is expanding to accommodate new suppliers rather than displacing Broadcom as an incumbent," Morningstar analyst William Kerwin said.

The warrant, disclosed in an SEC Form 8-K filed Aug. 19, covers AI inference accelerators, storage controllers, network interface controllers, memory interface controllers and near-memory compute solutions. Most of the shares — 57,610,040 — vest in 240 equal tranches, one unlocking for every $500 million in purchases, with a smaller slice of 1,360,867 vesting on a schedule over the first year. Full vesting requires $120 billion in qualifying purchases by Jan. 29, 2033.

The structure converts Google's spending into an asset: with Marvell shares near $237, the full package is already worth about $2.1 billion more than the $12.2 billion exercise cost. The cost falls on Marvell's existing shareholders, whose share count grows by about 7 percent if the warrant fully converts. Marvell shares jumped about 10 percent Wednesday after the disclosure, while Broadcom — Google's longtime TPU design partner — slipped nearly 3 percent.

The warrant makes Marvell the only firm designing for all three hyperscalers

The deal gives Marvell custom silicon ties to Amazon, Microsoft and now Google — a sweep Broadcom, which holds roughly 70 percent of the custom AI chip co-design market and serves Meta, Google and OpenAI, has not replicated. Marvell ran the same playbook with Amazon Web Services in December 2024, issuing a warrant for 4.18 million shares at $87.77 tied to Trainium and Inferentia procurement; the Google warrant is structurally identical but at roughly 14 times the share count.

The arrangement follows AMD's October 2025 partnership with OpenAI, which issued the AI company a warrant for up to 160 million shares — about 10 percent of AMD — at an exercise price of one cent, with tranches vesting as deployments scale. The Google-Marvell version carries a real exercise price and no gigawatt commitments, but the direction is the same: the biggest buyers of AI silicon are collecting equity from suppliers for the privilege of supplying them.

Google did not grant Marvell exclusivity. Broadcom announced in April a new long-term agreement covering future TPU generations, with component supply running through as late as 2031, even as Google added Marvell as a second design partner.

What Marvell will build, and what it means for shareholders

The covered products target the memory bottleneck in large language model inference, where a GPU must read all model weights out of memory on every forward pass. Marvell's AI memory portfolio, announced in early August, includes the Bravera SC6 PCIe 6.0 SSD controller, the Structera X CXL-based memory expansion platform, and the Photonic Fabric scale-up interconnect. The Structera X, built on intellectual property from Marvell's $540 million acquisition of XConn Technologies in February, demonstrated a 4.8x improvement in inference throughput and an 82.7 percent reduction in time-to-first-token for an eight-GPU cluster using 16 terabytes of pooled memory, according to Futurum Research.

For existing Marvell shareholders, the warrant introduces potential dilution: if fully exercised at $206.58 against a trading price above $230, the shares would be issued at a discount to market. The market's 10 percent surge on Wednesday reflected the judgment that the revenue visibility from a seven-year custom silicon relationship outweighs the dilution risk.

Marvell reports fiscal second-quarter 2027 results after the market closes Aug. 27. Analysts expect non-GAAP earnings per share near $0.93 — a 39 percent year-over-year increase — and revenue of approximately $2.71 billion, representing 35 percent growth. The stock trades at roughly 80 times trailing earnings and about 54 times forward earnings, a 124 percent premium to the semiconductor sector median of 24.37 times. Google revenue contribution is not expected to be material in the near term; the warrant vesting schedule runs through fiscal 2033.

For Alphabet, the warrant is a small item against a market value above $4 trillion. Even the full package, with Marvell's stock at double the exercise price, would carry a paper gain of about $12 billion — a fraction of a percent of Alphabet's value. But the deal shows where the leverage sits in the AI build-out: Alphabet's chip budget has become valuable enough that suppliers will hand over ownership stakes to win it.

This article is for informational purposes only and does not constitute investment advice.