As copper connections gradually lose their effectiveness in AI networks, optical interconnect technology is gaining increasing attention from Silicon Valley giants.
ASIC chip manufacturer Marvell announced today that it will acquire semiconductor company Marvell for $3.25 billion. Celestial AI, a startup. According to the agreement, the transaction includes $1 billion in cash and $2.25 billion in Marvell common stock, and is expected to close in the first quarter of 2026.
In addition, Marvell will pay an additional $2.25 billion after Celestial AI reaches certain revenue milestones, bringing the total transaction value to a maximum of $5.5 billion.
Marvell projects that Celestial AI will begin to contribute significantly to revenue in the second half of fiscal year 2028, reaching $500 million in annual revenue in the fourth quarter of fiscal year 2028, and doubling to $1 billion in annual revenue by the fourth quarter of fiscal year 2029.
At the heart of this transaction lies Celestial AI's Photonic Fabric technology. This technology uses light signals instead of electrical signals to connect to AI chips. and memory chips This technology exhibits strong thermal stability, enabling reliable operation in the extreme thermal environments generated by large, multi-kilowatt XPUs and switches. It allows for vertical interconnection with high-power XPUs and switches within a 3D package, significantly increasing HBM capacity within the XPU package.
According to the press release, the first application of photonic structure technology will be all-optical lateral scaling interconnects, which will provide a lateral scaling optical solution with 16 Tbps bandwidth in a single chip for the first time— 10 times the capacity of the most advanced 1.6T ports currently available .
Marvell CEO Matt Murphy stated that photonic structure technology will be used in the company's next-generation photonics-related infrastructure products, creating a new market worth $10 billion. In Murphy's view, large-scale cloud computing... The company will begin large-scale deployment of optical interconnect technology in 2027 or 2028.
A key component of AI full-stack capabilities
The aforementioned transaction is not Marvell's first foray into the optical interconnect field. Earlier this year, the company announced a breakthrough in custom AI accelerator architecture, integrating CPO (co-packaged optics) technology to significantly improve server performance.
As AI's demands for network bandwidth and cluster size continue to increase, copper connections are becoming insufficient in some scenarios, making optical interconnect technology increasingly important. To date, Silicon Valley giants have already taken action:
In March of this year, Nvidia At the GTC conference, NVIDIA launched the NVIDIA Spectrum-X and NVIDIA Quantum-X silicon photonics network switches. These products enable AI factories to connect millions of GPUs across regions while significantly reducing energy consumption and operating costs.
Google has tightly coupled its next-generation TPU and OCS technologies in its core computing clusters, resulting in a 30% increase in network throughput and a 40% reduction in overall power consumption.
It is worth noting that optical interconnect technology has become a key component of the full-stack AI ecosystems of Google and Alibaba . (Dongwu Securities) It is pointed out that customized computing power clusters place higher demands on networking capabilities. Google's TPU brings the next-generation optical interconnect solution OCS, and Alibaba's Panjiu super node has also greatly increased the demand for ScaleUp networking, or may move towards new optical interconnect technologies such as CPO/NPO in order to shorten communication latency.
At CITIC Securities It seems that the key driving force behind the importance of optical interconnect technology is... The increase in the value of optical modules in scale-out networks is mainly due to the continuous expansion of computing clusters and the gradual popularization of the ASIC + Ethernet mode.
From an investment perspective, the aforementioned institutions stated that Google has raised its 2025 capital expenditure guidance to $91 billion-$93 billion, and Alibaba's previously proposed three-year Capex guidance of $380 billion still has the potential to be revised upwards. Optimistic capital expenditure expectations will bring substantial incremental demand to the relevant optical interconnect supply chain, solidifying the performance support of related sectors. It is recommended to continue to focus on investment opportunities in upstream and downstream optical interconnect supply chain companies, such as those involved in various computing power solutions, including optical modules/CPO/NPO/OCS/DCI.
(Article source: CLS)
