$MRVL · Mark Roussin, CPA · 2026-11-10

The stock I am talking about is none other than Marvell Technology , and its stock market symbol is MRVL. If you’ve been following this channel for a while, you know that I’ve been very optimistic about this company because Marvell is working in two key areas of AI infrastructure building, which I believe have enormous long-term potential: the first is custom AI chips, and the second is optical networks.

This is where companies like Marvel and even companies like Broadcom come in. These companies help design and develop custom silicon chips for some of the world's largest technology companies.

So, Marvell has a presence in two areas that I was very interested in: custom AI chips and optical connectivity. When you combine these opportunities with the massive spending plans we've recently heard about from Amazon, Microsoft, and Alphabet, I think Marvel is well-positioned to capitalize on a strong, long-term trend.

Marvell's stock has risen by about 180%. I was very pleased with this return in my investment portfolio. I entered this position a little over a year ago using an options trade.

But going back to Marvell, look at the stock chart from the end of October. The stocks fell by nearly 40%. Well, on November 2nd and even before that, Marvel announced that it had entered into an agreement to acquire Lumentum, whose stock symbol is (LITE).

Marvell wants to strengthen its position in the field of optical communication, and combining Marvell's expertise in semiconductors and networks with Lumentum's optical technology could create a more comprehensive resource for artificial intelligence infrastructure .

Under the terms of the agreement, Marvell will acquire Lumintum in an all- stock deal. Lumintum shareholders will receive 4.5 shares of Marvell for every Lumintum share they currently own.

The deal values Lumentum at approximately $115 billion based on the company's value, but since it is an all-stock deal , it will depend on Marvell's stock price.

Following the completion of the acquisition, Marvell’s existing shareholders are expected to own approximately 67% of the combined company. Lumintum shareholders will own approximately 33%.

Management believes that the acquisition will expand its opportunities in the market. She also believes that this merger will improve margins, and believes that the company can generate more than $1 billion in annual cost synergies .

Management also indicated that the acquisition is expected to boost adjusted earnings per share in the first year after closing, which is important.

I don't want to suggest that Marvell's stock performance will definitely weaken until the acquisition is completed. The market doesn't work that way. The stock can certainly perform well if earnings continue to grow and investors become more confident in the deal.

Instead of simply evaluating Marvell’s custom chip business and optical networking opportunities, investors now have to assess a massive acquisition , not just for several quarters, but for a potential year and a half .

Again, the acquisition represents a price premium of approximately 25%, and management believes the combined business could generate more than $1 billion in annual synergistic profits.

Marvel already had an appealing growth story. She already had a presence in the field of custom AI chips and optical networks, and I admire that work.

Now, shareholders are being asked to accept a significant dilution of their stakes, a long closing timeline, and substantial merger risks in exchange for the potential for a greater opportunity.

For me , this changes the risk and return calculations.

After this announcement, Marvel no longer ranks highly on my list. I didn't sell Marvell shares because I believe their value will reach zero. I didn't sell it because I expect a massive drop in profits or because I'm worried about artificial intelligence or pessimistic about it.

I sold this investment because my assumption changed, and I believe there are better opportunities for my capital that are commensurate with the level of risk.

Could I be wrong? certainly. Marvel may succeed in completing this acquisition. We hope that this will be done as soon as possible. The merged company may achieve significant profit growth and the stock may outperform over the next few years .

If that happens, I will have missed that opportunity, but I am comfortable with this possibility because successful portfolio management is not about being right about every single stock.

So, that's why I sold my entire position in Marvell, and I think it's an important lesson for investors because we are currently experiencing a tremendous amount of volatility in the stock market, especially in AI stocks.

But my decision to sell Marvel had nothing to do with the prevailing concerns in the world of artificial intelligence. It was driven by a change in the allocation of the company's capital, with an acquisition deal worth $115 billion, and possibly more.

It's a significant premium, and there has been a substantial dilution of the stock's value and a closing schedule that may cast a shadow over me for about a year and a half.

Do you think Marvell made the right decision in acquiring Lumentum on the terms, or do you think the company is taking too much risk with this deal?