According to sources familiar with the matter, U.S. chipmaker Marvell Technology (MRVL.US) is in advanced negotiations to acquire chip startup Celestial AI in a cash-and-stock deal worth billions of dollars. The total transaction value, including milestone payments, could exceed $5 billion, with an announcement potentially coming as early as December 3.

Marvell, a network chip manufacturer with a market capitalization of $78.54 billion, competes with larger rival Broadcom in custom chips and networking solutions. The potential acquisition of Celestial AI would strengthen Marvell’s product portfolio, reflecting the sustained demand for computing power.

Celestial AI, backed by an AMD-affiliated entity, raised $250 million in venture capital in March, bringing its total funding to $515 million. The company, which counts Intel CEO Pat Gelsinger among its board members, leverages photonics—a technology using light instead of electrical signals—to create high-speed connections between AI computing chips and memory chips.

**Addressing the "Memory Wall" Crisis** Celestial AI focuses on developing its Photonic Fabric platform, designed to overcome the "memory wall" bottleneck in current AI computing architectures. By utilizing optical interconnects, the company offers high bandwidth, low latency, and energy-efficient solutions, enabling AI accelerators to scale from on-chip to multi-rack deployments.

As AI models grow exponentially in parameter size, memory bandwidth and latency have become critical bottlenecks. While smaller models can rely on hardware scaling, trillion-parameter models suffer severe inefficiencies due to the mismatch between compute units (CPUs, NPUs) and memory (DDR, HBM) speeds.

Celestial AI’s Photonic Fabric aims to bridge this gap, having secured over $515 million in funding. The startup has attracted significant investment, with AMD and Intel eager to challenge Nvidia’s NVLink dominance by extending their compute chips into optical interconnects. Meanwhile, Samsung, the global leader in HBM and DDR production, sees Celestial AI as a way to expand its memory pool business model.

For Marvell, acquiring Celestial AI represents a strategic bet on the future. If photonic interconnects become the standard in next-gen AI servers—as widely expected—Marvell would hold critical IP, strengthening its position in securing orders from cloud giants like Microsoft and Google.