Marvell Technology has just announced a massive deal with Google that’s sending shockwaves throughout the tech industry. The chipmaker has agreed to help develop Google’s in-demand custom chips, and in return, the search giant has been given the option to buy a potential $12.2 billion stake in Marvell. This move is seen as a major vote of confidence from a top cloud-computing provider and could bring in roughly $120 billion in revenue through fiscal 2033, if Google hits the targets its stake option depends on.

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What’s Behind the Deal?

The demand for in-house chips such as Google’s tensor processing units (TPUs) has surged in recent years as companies seek cheaper alternatives to Nvidia’s pricey graphics processors and technologies better suited for inference, the process of running trained AI models. A recent overhaul of Google’s AI division that shifted power toward executives with closer ties to Google Cloud has also put the spotlight on the custom chips and AI infrastructure, which analysts say are increasingly central to powering that business.

But this deal isn’t just about Google’s AI ambitions. It’s also about the growing concerns around the increasingly intertwined relationships in the AI industry. Just days after Nvidia agreed to provide a backstop of up to $105 billion for a data-center project OpenAI is leasing in Ohio, Marvell has struck a similar deal with Google. The AMD-Google deal, which was announced in October, also gave the ChatGPT maker the option to buy a stake of up to roughly 10% in the chipmaker.

The Marvell-Google deal covers a broad range of technologies used with TPUs, including processors that run AI models, manage data storage, and move information across networks. It gives Google a warrant to buy up to 58.97 million Marvell shares at $206.58 apiece, which is worth $12.18 billion if fully exercised and will make Google the fifth-largest investor of Marvell.

What Does This Mean for the Tech Industry?

This deal is a big win for Marvell, but it’s also a growing pie for Google, according to Morningstar analyst William Kerwin. He sees this news as a growing pie at Google for new sources, rather than a competitive displacement of Broadcom. With this deal, Google is solidifying its position in the AI industry and cementing its relationship with Marvell, a key player in the chipmaking space.

The tech industry is abuzz with the implications of this deal, and it’s clear that the stakes are high. The relationship between Google and Marvell will be closely watched, and the impact on the industry will be significant. As the AI industry continues to evolve, one thing is clear: the players who emerge as winners will be those who can adapt and innovate in this rapidly changing landscape.