Marvell Technology shares fell 6% to $235.20 in Friday morning trading, pulling back sharply after the company disclosed an expanded custom chip agreement with Alphabet’s Google.
The stock’s drop came despite a 196% year-to-date advance through Thursday’s close, highlighting how quickly investor sentiment can shift on dilution concerns.
The broader SOXX semiconductor ETF slipped only 0.8% on the same day, confirming the selloff was a single-stock dilution debate rather than a wider sector rotation.
Marvell disclosed the expanded agreement on August 19, 2026, under which it will develop a range of custom semiconductors for Google’s AI systems.
As part of the deal, Marvell issued Google a warrant to purchase up to 58.97 million Marvell shares at a fixed price of $206.58, well below the stock’s current trading level.
Because the warrant strike price sits below where the stock trades, dilution grows in direct proportion to how successful the deal becomes, creating an unusual dynamic for existing shareholders.
If Google exercises all 58.97 million shares, Marvell would be required to issue new stock, diluting current shareholders by approximately 6.3% to 6.7%.
The warrant vests across 240 tranches, each tied to $500 million in purchases, with nearly all shares requiring Google to spend $120 billion on custom products by the end of fiscal 2033.
That $120 billion purchase requirement is 14.6 times Marvell’s projected fiscal 2026 revenue, underscoring the sheer scale of commitment the deal envisions over its lifetime.
Wall Street’s response heading into Friday was broadly positive, with several major banks raising price targets and reiterating bullish ratings on the stock.
BMO Capital Markets initiated coverage with an Outperform rating and a $250 price target, while Roth Capital raised its target to $350 from $275, maintaining a Buy rating.
UBS lifted its price target to $310 from $300, and Jefferies held its Buy rating with a $325 price target, reflecting widespread confidence in the deal’s long-term revenue potential.
Stifel reiterated a Buy rating with a $350 price target, highlighting that the agreement could generate up to $120 billion in revenue over 6.5 years.
Morningstar analyst William Kerwin called it a strong win for Marvell but described it as Google adding new suppliers rather than moving away from existing partners like Broadcom.
Broadcom shares fell approximately 4% to 5% on the same day, though the company still holds a long-term Google agreement running through 2031, making this added competition rather than outright replacement.
Under the expanded agreement, Marvell will develop AI inference accelerators, storage controllers, networking hardware, and memory technologies for Google’s growing artificial intelligence infrastructure.
The Google deal gives Marvell a foothold with all three of the largest US cloud providers, as it already builds custom silicon for Amazon and Microsoft.
Reuters Breakingviews projected the deal could push forecast 2032 sales beyond $62 billion, compared with a previous estimate of around $43 billion, representing a dramatic upward revision.
If Marvell converts this agreement into steady, growing orders over the coming years, the dilution cost may ultimately prove a fair price for durable, long-term revenue streams.
