Recently, semiconductor manufacturer Marvell announced that it has entered into a definitive agreement to acquire optical interconnect solutions provider Celestial AI. The transaction is expected to be completed in the first quarter of 2026.

Under the terms of the agreement, Marvell will acquire Celestial AI for an upfront consideration of approximately $ 3.25 billion, consisting of $ 1 billion in cash and approximately 27.2 million shares of Marvell common stock valued at approximately

LightCounting, a research firm in the optical communications industry, believes this move further confirms that 2025 is becoming a pivotal year for the development of CPO (Co-Packaged Optics).

The year started with NVIDIA announcing in March its adoption of 200G/channel CPO technology on its InfiniBand and Ethernet switches. At the end of September, Meta shared test data demonstrating the excellent reliability of Broadcom's first two generations of CPO. In October, Broadcom launched its third-generation 200G/channel CPO product.

Meanwhile, at the recent TEF 2025 event hosted by the Ethernet Alliance, NVIDIA reported that AI clusters utilizing CPO switches achieved a 10x improvement in system resilience compared to systems using pluggable optical modules. This higher reliability further resulted in a 5x improvement in GPU utilization efficiency. In comparison, the benefits derived from higher reliability are currently far more significant than the initially pursued goal of lower power consumption for CPO.

Marvell announced its plan to acquire CPO-focused startup Celestial AI for 3.25billion.Incontrast,Cienapaidonly3.25billion.Incontrast,Cienapaidonly 270 million when it acquired another CPO startup, Nubis Communications, in September 2025. Celestial AI's technology is based on a photonic interposer, similar to the solution developed by Lightmatter. Both Celestial AI and Lightmatter raised hundreds of millions of dollars in funding at the beginning of 2025.

The diagram below illustrates how Celestial AI's "Photonic Interconnect Technology" fits into Marvell's product portfolio. While it currently represents only a small part of the overall picture, for Marvell, this could be a critical piece of the company's future strategy. ESUN stands for "Ethernet for Scale-Up," which is the application scenario where CPO is truly needed.

The primary risk factor lies in the technology itself proposed by Celestial AI. While the photonic interposer holds great promise, it represents a significant disruption to current mainstream interposer technologies such as CoWoS. It might be the right direction for the future, but mass production could still be years away.

To bridge this gap, LightCounting expects Celestial's first-generation products to be photonic engine chiplets co-packaged with traditional XPUs. This solution is similar to Lightmatter's Passage L200 photonic engine, connecting to the XPU or switch via UCIe.

Although Broadcom and NVIDIA have demonstrated excellent reliability with their CPO products for switches, it may not yet be sufficient for integration with the "heart" of AI clusters—the XPU. Switches are more like arms and legs; if one fails, the system can still operate. However, an XPU failure has a much greater impact. Although the industry has mechanisms to handle XPU failures, any component added to the XPU will face extremely rigorous validation.

LightCounting emphasizes that achieving reliable integration of CPO with XPUs requires all leading vendors, including Marvell, to work together and drive the industry forward.