Marvell Technology shares fell sharply on Thursday as a chip and AI infrastructure selloff followed the Democratic midterm victory. The company also faces pressure from its all-stock Lumentum deal, which could dilute shareholders further as its share price drops.
Marvell Technology stock was down 13.4% as of 2:42 p.m. ET on Thursday, Nov. 5. The drop came after the Democratic midterm victory set off a selloff in chip and AI infrastructure stocks.
The broader market fell too. The S&P 500 and the Nasdaq Composite were down 3.9% and 5.0%, respectively.
Data center fears hit chip stocks
Investors are fleeing anything tied to AI data centers two days after Democrats flipped both houses of Congress and won several key governorships.
Many Democrats ran on a platform that included increased oversight of the AI industry. The party's new governors in Texas, Ohio, and Georgia — major AI data center states — are promising construction moratoriums.
Marvell is exposed because it sells the networking chips that move data around inside those data centers.
Lumentum deal adds dilution risk
The selloff comes days after Marvell announced an all-stock deal on Monday to buy Lumentum, an AI photonics maker, in a transaction worth $115 billion. That could lead to significant dilution for Marvell stock.
However, a falling Marvell share price also lowers the value of the shares it is offering Lumentum. As a result, there is a risk the deal falls apart or the terms get renegotiated, and Marvell shareholders would then see even more dilution.
Source: The Motley Fool
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