Google Is Getting Paid in Marvell Stock Warrants for Buying Marvell's Chips
The search giant lined up another custom silicon partner this summer. It also negotiated something a purchase order never includes: the right to buy its supplier's stock at a fixed price.
Overview
Google, the search and cloud computing business owned by Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), expanded its custom chip work this summer. On July 29, it signed an agreement with Marvell Technology (NASDAQ:MRVL) covering artificial intelligence (AI) inference accelerators, storage controllers, and other silicon built around Google's in-house TPU chips.
The unusual part surfaced in a securities filing this week. Alongside the agreement, Marvell handed Google a warrant covering 58,970,907 of its shares (roughly 7% of the company) at a fixed price of $206.58. Marvell shares jumped about 10% Wednesday after the disclosure, closing near $237.
Details
Put another way, Google isn't just buying chips from a supplier. It negotiated the right to profit from its supplier's stock while doing so. And the package would cost about $12.2 billion to exercise in full, while obligating Google to buy nothing at all.
Source
Originally published at www.fool.com.