Marvell's $12.2bn warrant pays Google in Marvell stock, one $500m order at a time

Marvell Technology told regulators on Wednesday that it has given Google a warrant to buy up to $12.2 billion of its shares, and in return Google will buy its custom chips ^[1]. The commercial terms are not in the headline number but in the vesting schedule: nearly 1.4 million shares vest in the first year, according to Bloomberg, and the rest unlock in tranches tied to every $500 million of chips Google orders ^[21][2].

The warrant covers 58,970,907 shares at $206.58 each, which CNBC reported is worth about $12.2 billion if fully exercised ^[3]. That multiplication comes to roughly $12.18 billion, so the quoted figure is what Google would pay to exercise, not what it would collect ^[11]. Google puts up no cash in advance; it earns the right to buy as it places orders ^[4]. The purchasing targets run through Marvell's fiscal 2033, and Reuters reported that hitting them would mean roughly $120 billion of custom-chip sales ^[5]. At $500 million a tranche, that is 240 tranches, or about 240,000 shares each after the first-year vest, near $50 million of purchase rights at the strike price for every $500 million spent ^[13]. Fully exercised, it could make Google Marvell's fifth-largest investor ^[12].

The structural part is what the rebate is denominated in. A cash discount is banked and forgotten. A warrant struck at $206.58 is only worth something if Marvell trades above it, and one of the larger inputs into Marvell's custom-silicon story is how much Google orders ^[3][5]. Volume vests the shares and supports the price those shares are measured against. Moving marginal orders elsewhere costs Google twice.

Broadcom has supplied Google's custom chips for most of the past decade and expanded that arrangement in April ^[6]. It can match a price cut; matching this requires issuing warrants against its own equity. Investors priced the difference: Marvell rose about 8 percent after climbing as much as 14 percent earlier in the day, Broadcom fell around 5 percent, and Alphabet was little changed ^[22].

Two limits are worth holding onto. Marvell said the expanded agreement covers products that "attach to the tensor processing unit ecosystem," such as AI inference accelerators and controllers that handle storage and networking, rather than Google's main processors ^[7]. The lock-in sits on the periphery. And William Kerwin of Morningstar told Reuters this was "a big win for Marvell" while reading it as "a growing pie at Google for new sources, rather than a competitive displacement of Broadcom" ^[8][9].

Behind it is a spending curve. Google, along with Amazon, Meta and Microsoft, has been designing its own silicon to depend less on Nvidia ^[10]. Citizens analyst Andrew Boone estimated Alphabet will make about $3 billion from TPU-related infrastructure this year and $25 billion in 2027, a forecast cited by Bloomberg ^[14], roughly eight times in two years ^[20]. Bloomberg also said arrangements tying a chipmaker's sales to its customer's stock or spending have stoked fears of inflated valuations and an AI bubble ^[15]. This one lands days after Nvidia agreed to backstop up to $105 billion for a data centre OpenAI is leasing in Ohio ^[16], and months after AMD agreed to supply OpenAI and gave it an option on a stake of up to about 10 percent ^[17]. Bloomberg noted Marvell's warrant is narrower than an open investment, being tied specifically to purchases of certain custom chips ^[18]. Jeff Gundlach has warned that turning AI chips into an asset class looks like a market top ^[19].

Watch whether Marvell discloses tranche vesting often enough for outsiders to infer Google's order pace, whether Broadcom answers with equity-linked terms of its own ^[6], and whether Marvell holds above $206.58, because below the strike the incentive that makes the structure bind is worth nothing ^[3].