Every video call you join and every chatbot answer you get travels part of its trip as laser light. Marvell Technology (MRVL) makes chips that work alongside many of those lasers.
Lumentum Holdings (LITE) makes many of the lasers, and it can’t keep up. CEO Michael Hurlston said this month its optical parts are sold out through early 2029, Bloomberg reported.
Marvell may have found a permanent fix. The chipmaker, which already buys lasers from Lumentum, is in advanced talks to buy the company, Bloomberg reported on Wednesday, October 28, 2026. A deal could come as soon as next week, though nothing is signed.
Marvell’s investors pulled back hard. The stock fell about 13% on Thursday, October 29, 2026.
The problem is size. Lumentum was worth about $83 billion before the report. Marvell held about $3.9 billion in cash at the end of its latest quarter, according to its earnings release.
Also read: Bank of America tweaks Marvell stock target after key Analyst Day
Bloomberg reported that Marvell would likely pay in shares. I understand why Marvell wants to own its bottleneck. I’m far less comfortable with the currency.
Marvell’s shareholders started paying on Thursday
An all-stock deal moves the risk onto Marvell’s share price. Lumentum holders would be paid in Marvell stock, so every drop in its share price shrinks the offer.
Marvell’s market value ended Thursday near $191 billion. Bloomberg had valued it at about $221 billion before the report. The one-session loss comes to roughly $29 billion.
That loss alone equals more than a third of Lumentum’s entire value. To me, Marvell’s owners took a takeover-sized hit without seeing a single term.
Lumentum’s stock told the same story. Its shares rose as much as 7% on Thursday. By the close, the gain had shrunk to less than 1%.
I read that fade as the market marking down the premium in real time. When the buyer pays in stock, a falling stock means a smaller prize.
JHVEPhoto / Getty Images
Owning a supplier could cost Marvell some customers
The deeper risk may not be the price. In 2023, Lumentum bought Cloud Light, a maker of optical transceiver modules, for about $750 million, according to a company filing.
Rival module makers buy Marvell’s signal-processing chips. After a deal, Marvell would own a competitor to some of its own customers.
Stifel estimated that Marvell holds 60% to 65% of the market for one key type of those chips, according to Seeking Alpha. The firm warned that a merger could cost Marvell share if rival module makers switch suppliers.
RBC Capital Markets still said a combination “makes strategic sense given the highly complementary product portfolios,” according to Seeking Alpha. It also noted that Marvell outsources its chipmaking, while Lumentum runs its own laser fabs. Combining the two could make margins swing more, RBC warned.
Stifel said the closing would likely take time and require approval from both U.S. and Chinese regulators, according to Investing.com. It also listed building a scaled-up U.S. transceiver supplier, given possible limits on Chinese modules, as one of the deal’s drivers.
A deal built partly around limits on Chinese modules may still need Beijing’s sign-off. That irony is what I’d watch most closely.
More Artificial Intelligence:
- AI’s biggest business opportunity may not look like AI
- AI racks are outgrowing old power: 2 chipmakers have a strategy
- BofA splits software into winners and losers as AI agents arrive
What the deal could mean for both stocks
Marvell entered the week as a big 2026 winner. The stock set an intraday all-time high of $329.88 in June. Its 52-week low of $70.69 shows how fast that run came.
The 47 analysts at StockAnalysis rate Marvell a Strong Buy. Their average target of $340.56 sits far above Thursday’s close. Piper Sandler and Stifel kept Buy ratings that day.
Lumentum’s climb has been even steeper. Its all-time low was about $14 in October 2015. Its intraday record of $1,143 came on October 9, 2026.
The 28 analysts at StockAnalysis rate Lumentum a Buy. Their average target of $1,166 was last updated before the deal talks, so it reflects the business, not a buyout.
Thursday’s nearly flat close suggests the market isn’t counting on a rich Lumentum premium. Three things will settle it:
- The exchange ratio will show how much of the combined company Lumentum holders would own.
- Lumentum’s quarterly results are expected Thursday, November 5, 2026, according to a press release.
- Plans for Cloud Light will show whether Marvell intends to compete with its chip customers.
If I owned Marvell, I wouldn’t sell into Thursday’s drop, but I wouldn’t add until the terms are public. For Lumentum, I’d wait for the November 5 report before buying.
Scarce lasers could change how chipmakers shop
When a part gets this scarce, buyers stop haggling over supply and start buying the supplier. Stifel listed securing laser supply among this deal’s drivers.
With Lumentum sold out into 2029, chip designers that need lasers are negotiating from a position of weakness. If Marvell signs, I expect investors to view every independent laser maker as a supplier a chip giant can’t do without.
More Stocks News
- Googling for Reddit answers is about to get harder
- ServiceNow CEO makes striking ‘unicorn’ claim after $3M bet
- Jim Cramer has a new way of thinking about the biggest tech stocks
- Stock Market Today (Oct. 30, 2026): S&P 500 sinks as Amazon, Intel losses shake Wall Street
