Marvell Bears Spar With Bulls as Google Deal Bolsters Outlook
$Marvell Technology(MRVL)$
Shares of the chipmaker swung between gains and losses Thursday after its 8% the previous session pushed eight of the 15 most commonly used technical indicators to flash warnings of a divergence or oversold conditions that could disrupt the rally. After yesterday's gains, the stock is now up 44% from its low on July 29. That could mean near-term caution or consolidation risk is elevated, even if the longer-term trend has improved.
Hopes that the rally could take a pause is providing some relief to short sellers who piled in Wednesday, as they attempted to fade the rally. Trading in borrowed Marvell shares that were sold short climbed to 4.8 million shares, from 2.84 million shares. But those bearish wagers didn't work yesterday, and the stock still closed higher.
Marvell expanded its partnership with Google to design custom chips for the hyperscaler's Tensor Processing Unit ecosystem, spanning AI inference accelerators, storage controllers, and specialized memory hardware, according to the chipmaker's filing with the Securities and Exchange Commission Wednesday.
Marvell's SEC disclosure represents a difficult setup for short sellers betting against Marvell's custom silicon narrative. The partnership could offer Marvell's long-term investors a massive revenue runway while posing an immediate threat to short sellers.
The multi-year commitment from Google also weakens the arguments that cloud giants might bring chip design entirely in-house or divert market share toward competitors. To cement the alliance, Marvell granted Google a performance-linked warrant to purchase up to 58.97 million shares of Marvell common stock at an exercise price of $206.58 per share. While a small portion of the warrant vests on a timeline over the first year, the vast majority of the equity is tied to strict sales milestones: one tranche vests for every $500 million in custom product revenue Google generates for Marvell through fiscal 2033.
With the exercise price set at $206.58 per share, the structure establishes a high-profile benchmark for valuation expectations, leaving short sellers exposed to a potential short squeeze if revenue milestone momentum accelerates faster than expected.
The warrants granted to Google equates to a potential stake of roughly $12.2 billion if fully exercised, with most of the warrants vesting only if certain revenue targets are met through fiscal 2033. Analysts at firms including RBC Capital Markets and Stifel described the agreement as a meaningful positive for Marvell's custom silicon business.
While Marvell's short volume climbed yesterday, they were no match for the bulls who came charging in. By the time the market closed, the short volume just accounted for 10.95% of the shares that changed hands Wednesday, lower than the average of 11.78%.
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