Key Points
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Marvell stock is falling hard after Democrats’ midterm victory set off a selloff in chip and AI infrastructure stocks.
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Democrats’ new governors in Texas, Ohio, and Georgia, all major AI data center states, are promising construction moratoriums, and Marvell sells the networking chips that move data around inside those data centers.
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Marvell’s all-stock Lumentum deal could mean significant dilution, and as Marvell stock drops, the value of the shares it is offering Lumentum falls too, which raises the risk the deal falls apart or gets renegotiated.
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Marvell Technology, Inc. (NASDAQ:MRVL) stock is down 13.4% as of 2:42 p.m. ET on Thursday, Nov. 5, after Democrats’ midterm victory set off a sell-off in chip and AI infrastructure stocks.
The S&P 500 (SNPINDEX:^GSPC) and the Nasdaq Composite (NASDAQINDEX:^IXIC) are down 3.9% and 5.0%, respectively.
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Why Marvell stock is falling after the midterms
Investors are fleeing anything tied to AI data centers two days after Democrats flipped both houses of the U.S. Congress and won several key governorships.
Many Democrats ran on a platform that included increased oversight of the AI industry, with the party’s new governors in Texas, Ohio, and Georgia — major AI data center states — promising construction moratoriums.
Marvell sells the networking chips that move data around inside those data centers — it sits right in the blast zone.
Image source: Getty Images.
How Marvell’s Lumentum deal could dilute shareholders
But this comes just days after an all-stock deal was announced Monday to buy Lumentum (NASDAQ:LITE) — an AI photonics maker — worth $115 billion. That could lead to significant dilution for Marvell stock. But it also means that as Marvell stock drops, the value of the shares it is offering Lumentum falls as well. There’s a risk the deal falls apart or the terms get renegotiated, and Marvell shareholders see even more dilution.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lumentum and Marvell Technology. The Motley Fool has a disclosure policy.
