Under the chip supply agreement, Alphabet's Google unit obtained warrants permitting it to purchase up to $12.2 billion in Marvell Technology shares. A regulatory filing shows the warrants relate to roughly 59 million Marvell shares, with an exercise price of $206.58 each. Roughly 1.4 million warrants become exercisable during the initial year of the agreement. The remaining warrants vest incrementally, with each $500 million in chip purchases from Google unlocking additional tranches.
These Marvell components are designed to work with Google's tensor processing units, or TPUs, which are specialized processors for developing and running artificial intelligence models. To cut expenses, Google and other tech firms have increasingly designed their own AI chips, especially since Nvidia's top accelerators can cost tens of thousands of dollars apiece. Amazon.com Inc. is another company pursuing its own semiconductor designs.
Marvell's stock surged up to 14% following the announcement. By 10:30 a.m. in New York, the shares had gained 7.6% to trade at $232.42. Alphabet's shares saw minimal movement.
Market participants have grown wary of so-called circular transactions among technology firms, especially those linking chip suppliers with AI buyers. Nvidia's string of multi-billion-dollar agreements with major customers over the past few years has raised worries about artificially inflated valuations and distorted demand that could signal an AI bubble.
Google offers its TPUs to external clients, and they have become a major draw for those customers. Alphabet is projected to earn roughly $3 billion from TPU-related infrastructure in the current year and $25 billion by 2027. With this business expanding, Google has pursued additional custom chip development.
In April, the company inked a deal with Broadcom Inc. to design and provide custom TPUs. Broadcom's stock dropped as much as 5.8% after it became known that Google would also work with another chip supplier.
These moves highlight a broader trend among major cloud providers to bring chip design in-house while still partnering with specialized semiconductor firms. For Marvell, the arrangement secures a long-term buyer and a stake in Google's AI growth. For Alphabet, it reduces reliance on a single supplier and helps manage costs as AI workloads explode. The structure also mitigates risk for Marvell, as the warrants only vest if Google actually purchases the chips, ensuring that the equity is earned through real demand.
Custom silicon has become a strategic priority for large cloud providers seeking to reduce dependence on outside chip makers and control the cost of massive AI deployments. Google already rents access to its TPUs through its cloud, giving external customers a way to run AI workloads without buying Nvidia's most expensive accelerators. The Marvell deal is another step in that direction, using warrants as a financial bridge between Google's procurement commitments and Marvell's long-term revenue outlook. Because the warrants vest only as purchases occur, the arrangement ties Marvell's equity reward to confirmed orders, which may ease investor concerns that AI chip demand is being overstated.