Google, the search and cloud computing business owned by Alphabet (GOOG +1.05%)(GOOGL +1.22%), expanded its custom chip work this summer. On July 29, it signed an agreement with Marvell Technology (MRVL -5.57%) 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.
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.
Image source: Alphabet.
The warrant pays Google to be a customer
Most of the warrant’s shares (57,610,040 of them) vest as Google’s purchases accumulate — another block of stock with each $500 million spent on the covered products. A smaller slice of 1,360,867 shares vests on a schedule over the first year, purchases or not.
Those purchases are discretionary, according to the filing. Google controls the pace entirely, and nothing obligates it to spend a dollar.
The structure is unusually favorable. A big buyer can always negotiate volume discounts, but a discount ends at the price of the chips. The warrant converts Google’s spending into an asset. Every $500 million of purchases hands Google another block of Marvell stock at $206.58 per share, and with the stock near $243, the full package is already worth about $2.1 billion more than it would cost to exercise.
The cost of that sweetener doesn’t fall on Google. It falls on Marvell’s existing shareholders: the share count grows by about 7% if the warrant fully vests and converts into shares.
AMD’s OpenAI deal set the template
It is not the first time in the past year that a huge AI buyer has collected equity from a chip supplier for agreeing to buy.
In October 2025, AMD (AMD +0.81%) announced a partnership to supply OpenAI with 6 gigawatts of graphics processing units (GPUs), and it issued the AI company a warrant for up to 160 million AMD shares (about 10% of the company), with tranches vesting as deployments scale and as AMD’s stock hits price targets. That warrant carried an exercise price of one cent per share.
The Google-Marvell version is more conventional: a real exercise price and no gigawatt commitments. But the direction, I’d argue, is the same. The biggest buyers of AI silicon have started charging their suppliers, in equity, for the privilege of supplying them.
Google didn’t hand Marvell exclusivity in return. Google has relied on Broadcom to design its TPUs, a chip line dating to 2015. And Broadcom announced in April a new long-term agreement covering future TPU generations, with component supply running through as late as 2031 — even as Google lined up Marvell as an additional partner. Google is adding suppliers and getting paid for it.
Small numbers at Alphabet’s scale
Collecting every performance-based share requires $120 billion of qualifying purchases by Jan. 29, 2033. For Alphabet, that is less than three quarters worth of capital spending at the company’s current pace. The company spent $44.9 billion on capital expenditures in the second quarter alone, roughly double the year-ago figure, and $132 billion over the trailing 12 months.
Today’s Change
(1.22%) $4.15
Current Price
$344.82
Key Data Points
Market Cap
Day’s Range
$340.40 – $346.20
52wk Range
$201.30 – $408.61
Volume
20.8M
Avg Vol
32M
Gross Margin
60.94%
Dividend Yield
0.25%
And Alphabet already knows what partner equity can do for its results. The second quarter was strong on its own, with revenue up 24% year over year to $119.8 billion. But the quarter’s other income also included a net gain of $98.0 billion, primarily unrealized gains on its equity securities. That single line is most of the reason earnings per share nearly quadrupled to $9.11 in a quarter when operating income rose 30% year over year.
Marvell shares bought through the warrant would land in exactly that bucket — small next to a $98 billion quarter, but the same kind of asset.
Of course, a single warrant is a small item for a company with a market value above $4 trillion. Even the full package, with Marvell’s stock at double the exercise price, would carry a paper gain of about $12 billion — a fraction of a percent of Alphabet’s value.
What the warrant shows, I think, is where the leverage sits in the AI build-out. Alphabet’s chip budget has become valuable enough that suppliers will hand over ownership stakes to win it. For Alphabet shareholders, it is a small sweetener on chip spending that was likely coming anyway.
Source link
