Marvell Sinks 13%, Lumentum Jumps 6% on Reported Acquisition Talks; Coherent Holds Flat, Applied Optoelectronics Drops 3%

Traders are rewarding the target and punishing the buyer as Marvell Technology (NASDAQ:MRVL | MRVL Price Prediction) reportedly closes in on a deal to lock up scarce optical components for AI data centers, while rival optics names aren’t getting a sympathy bid. Marvell stock is at $220, down 13% in morning trading.

Lumentum (NASDAQ:LITE) stock is at $965, up 6%, as the reported target. Looking further at the peer group, Coherent (NYSE:COHR) stock is at $240, up 0.2%.

Inside the Reported Marvell Bid for Lumentum

Bloomberg reported late on October 28, citing people familiar with the matter, that Marvell is in advanced talks to buy Lumentum and that a deal could be announced as soon as next week. No final agreement has been reached, and the terms could still change. The talks were reported after the close of regular trading, setting up the sharp moves in both names.

Lumentum makes lasers, optical components and networking systems for cloud and AI data centers, and demand for its indium-phosphide technology is running well ahead of supply. Michael Hurlston, the company’s CEO, has previously said Lumentum is essentially sold out of certain products into 2029 and is shipping well short of demand. That scarcity is what makes the company so attractive to a chip designer chasing AI connectivity.

Marvell, a fabless chip designer focused on data infrastructure, recently expanded its custom silicon partnership with Alphabet (NASDAQ:GOOGL) unit Google, including a warrant for Google to acquire up to 7% of Marvell shares tied to revenue milestones. Earlier this year, the company completed its acquisition of Celestial AI, which works on photonic interconnects. On its August 27 earnings call, Marvell’s management noted customers are actively planning scale-up optics deployments starting as early as next year. A combination with Lumentum could give Marvell access to optical components that can replace copper interconnects and ease constraints in AI clusters.

Why Marvell and Lumentum Are Moving in Opposite Directions

Sellers are hitting Marvell hard on a deal that could strengthen its AI position, which suggests investors are weighing the price and the dilution risk of a large acquisition. At a market value of $82.8 billion, Lumentum would be a hefty purchase even for a buyer valued at $220.7 billion. Shareholders also have to price in the execution work of absorbing a company of that scale. The reaction is a reading of sentiment, since no terms have been disclosed.

Both parties came into the report with huge gains. Marvell stock is up 159% year to date (YTD). Lumentum stock has run even further, up 162% YTD, so both names had a lot of good news priced in before the report.

Coherent stock is essentially flat and is up 30% YTD. Applied Optoelectronics (NASDAQ:AAOI) stock is at $80, down 3%, though it’s up 128% YTD. With data center and industrial segments plus thermal products for AI cooling, Coherent runs a broader photonics business than Lumentum, while Applied Optoelectronics is a smaller, vertically integrated transceiver vendor that also serves cable TV networks.

Takeover premiums fall to the target, so rivals such as Coherent don’t share in Lumentum’s gain. One reading is that a combined Marvell and Lumentum could become a tougher competitor for Coherent in AI optics. Another is that the deal highlights how scarce optical capacity has become, which could eventually work in Coherent’s favor. A disclosed price could tip that balance one way or the other.

What a Definitive Marvell Agreement Would Settle

The next test for Marvell is whether a definitive agreement with Lumentum is announced, and at what price and structure. Owning Lumentum’s laser supply could cement Marvell’s role in AI optics as data center networks shift from copper to light. The bears may focus on cost, since Marvell already carries $4.963 billion of long-term debt and a stock-heavy deal could compound dilution worries.

For Lumentum, the risk runs the other way, since the takeover premium could reverse quickly if the talks collapse. Coherent and Applied Optoelectronics face a test of their own once terms are known, because a rich price could reset how buyers value scarce optical capacity across the group. Volatility across the group could stay elevated until the Marvell and Lumentum negotiation concludes.

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