Marvell Technology Group Ltd. has announced an agreement to acquire Celestial AI, a fabless semiconductor company, in a deal valued at $3.25 billion. The acquisition is aimed at strengthening Marvell's presence in the rapidly growing artificial intelligence (AI) and cloud data center markets.

The $3.25 billion price tag includes $2.4 billion in cash and $800 million in Marvell common stock. The deal is expected to close in the second half of Marvell’s fiscal year 2024, subject to customary closing conditions and regulatory approvals.

Celestial AI specializes in developing high-performance, low-power optical interconnect solutions that are crucial for advanced AI and high-performance computing (HPC) applications. These solutions enable faster data transfer and reduced energy consumption in data centers, which are key concerns as AI workloads continue to expand.

Marvell has been strategically expanding its portfolio of products and solutions for the data center market. The acquisition of Celestial AI aligns with this strategy, providing Marvell with access to cutting-edge optical interconnect technology and a talented engineering team. Analysts believe this move positions Marvell to better compete with other major players in the data center semiconductor space, particularly as demand for AI infrastructure continues to surge.

The combination of Marvell’s existing data infrastructure expertise and Celestial AI’s optical interconnect capabilities is expected to create significant synergies and drive innovation in the AI and cloud data center sectors.