Why Marvell Just Spent $115 Billion On Lasers

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Monday, November 2nd. In today's episode, we'll break down the tech sell-off from October and why the rest of the stock market is holding up just fine. We'll also tell you about a $115 billion AI merger that could shake up the industry. Then stick around to the end of the show to find out why car companies aren't advertising during football games anymore. We got a great show for you today. Let's go. Stocks closed out October with a brutal tech sell-off on Friday. The S&P 500 dropped by 1.8% and the NASDAQ fell by 2.9%, its worst single day since June. That capped off a rough October where the NASDAQ lost more than 5%, which was its worst month since March of 2025. But as I've been saying for the past few weeks, outside of tech, The rest of the market is doing just fine. For example, the regular S&P 500 fell by 0.9% in October. Meanwhile, the equal weight S&P gained 4.9% in the month. That was the widest gap between the two indices since April of 2009. The stock market isn't broken right now. It's the AI trade that seems to be broken. And if you're like me and you have a tech heavy portfolio, you're You're definitely feeling the pain right now. But there's a good chance that your parents' portfolio is doing just fine. By the way, we put up a poll on Spotify asking about your portfolio. If you have like an extra five to 10 seconds, please consider voting in that poll. Your participation really does help us out. But yeah, you know, the AI trade, it's in a really weird spot right now. I think investors are really worried about all the debt these companies are taking on. The market reaction to Google and Amazon reporting negative free cash flow in their quarter. was not great. So we'll see where the market goes from here. Maybe we'll get a bounce back in November. I took a peek at the market futures right before recording. I did see some green in the pre-market. Now we're still in the thick of earnings season. We have a busy week ahead. Starting with Apple and Palantir, which both report today after the bell. We also have the midterm elections tomorrow and then the October jobs report on Friday. There's still a lot to talk about right now. And for the market to digest, we're going to be covering all of it throughout the week. So if you're new here, you picked a great time to start listening. Definitely get subscribed if you haven't already and tune in every day to stay in the loop. Let's run through some headlines, starting with a massive merger in the AI space. The chipmaker Marvell announced that they are buying Lumentum in an all stock deal worth about $115 billion, including debt. The stock part of this deal is worth about $80 billion. Lumentum shareholders will get four and a half Marvell shares for every share they currently own. According to Bloomberg, on an equity basis, this is the biggest deal Now, both these companies have kind of become household names recently. They've seen their value skyrocket over the last couple of years because of the AI boom. Marvell designs custom chips and networking tech for data centers. They have deals with both Amazon and Google. And Lumentum makes lasers and other optical components that help move data using light. We actually interviewed the CEO of Lumentum earlier this year. So why is Marvell buying Lumentum? Well, the company is going all in on the data center build out and trying to compete with giants like Broadcom. Now, Marvell was already buying the laser tech from Lumentum so their chips could talk to each other faster. So buying the company and becoming better vertically integrated does make sense. Now, Lumentum literally could not make their lasers fast enough to supply their customers. And now Marvell can just keep all that supply for themselves once they take over the company. But, you know, the market's reaction hasn't been so great. When Bloomberg first reported about the merger talks last week, Marvell stock dropped 12% in a single day. And since then, Marvell stock has dropped more than 20% and Lumentum stock is down about 8%. Now, some of that has to do with the overall chip sell-off last week, but investors are also worried about share dilution. Now, Marvell is basically printing a ton of new shares to pay for a company that's roughly half of its size. But that could also be a smart play here because, again, Marvell isn't using any cash for this deal. They're using their inflated stock price as currency. I also think the timing here is kind of interesting. Last week, Wall Street punished Google and Amazon for spending too much on AI. But clearly, Marvell doesn't think the spending will slow down anytime soon. But here's the thing. A deal this big still needs to clear shareholder approval and regulatory approval. So it might not close until 2028. And who knows what the AI environment will look like then. Now, if the AI build-out keeps growing, this deal could look like a genius move. But if last week was the start of some sort of pullback, even if it's minor, this deal could end up looking like a disaster. And we won't really know the answer to that question for a couple years. By the way, a quick fun fact about both these companies, NVIDIA actually invested $2 billion each into Lumentum and Marvell back in March. I think it's safe to say that investment paid off pretty well for Jensen. Let's talk about some stocks making moves today. First up, we have Echo Star. Echo Star stock is up almost 5% this morning after the Washington Post reported that SpaceX is thinking about buying Echo Star's Boost Mobile or at least using their network. You know, SpaceX has made it pretty clear they want to become a full-blown wireless carrier. Starlink already has 13.6 million users, which is up 90% from a year ago. But satellites alone can't give you full coverage. So SpaceX needs a network on the ground. And over the last few weeks or so, they've been buying Spectrum and there's been rumors about a potential deal with a tower company. And now there's rumors of this Boost Mobile acquisition. Now Boost Mobile already has more than 7.5 million subscribers and Echo Star already sold SpaceX a bunch of wireless Spectrum a while back. So another deal could be in the works and shares of Echo Star are jumping as a result. Next up, we have Marriott. Marriott stock is up more than 4% this morning after the hotel company beat on earnings. Revenues grew 8% to just over $7 billion, while adjusted earnings came in at $3.02 a share. One of the most important metrics in the hotel industry is revenue per available room. That jumped more than 7%. In the US and Canada, Marriott also raised its full year forecast as they expect demand to stay healthy. So apparently people are still traveling and booking hotel rooms. Staying with the consumer, Estee Lauder stock is up more than 4% this morning after they crushed their earnings. And the standout was their fragrance business, which sales jumped more than 19% from a year ago. Their skincare business also saw decent growth. And the company says that their turnaround plan is starting to work. Estee Lauder stock has been hot. recently, which shares up nearly 20% in the past month, and the stock is going up again to start the month of November. Next up, CrowdStrike. CrowdStrike is up more than 3% this morning after Deutsche Bank upgraded the stock to a buy. Their argument is that Wall Street still isn't appreciating how much AI is going to grow the cybersecurity market because More AI means more AI powered cyber attacks. I agree. I think the cybersecurity space is definitely an industry to pay close attention to. CrowdStrike could be one of the big winners. I mean, their stock has already doubled this year, but I'm keeping my eye on it. And finally, let's talk Rivian. Their shares are up around 4% this morning after UBS upgraded the stock to a buy. We talked about Rivian's earnings on Friday's show. They came in solid. And now UBS thinks that a potential turnaround point is happening as the company ramps up their R2 midsize SUV. Rivian stock has lost more than 35% of its value this year, but the stock could start catching some momentum now. Let's wrap the show with a fun fact. Car companies are starting to advertise less on traditional TV. According to the Wall Street Journal, auto advertising is expected to fall below 10% of all U.S. ad spends for the first time this year. Just for some context, 10 years ago, auto ads accounted for about 13% of U.S. ad spend. And you know, you'll really notice this if you're a football fan like me. There's a lot less commercials. During NFL games. Now, the reason that auto companies are cutting back on commercials comes down to money. You know, tariffs and higher interest rates and higher gas prices are putting pressure on the auto industry. So these companies are taking a closer look at their marketing budgets. You know, advertising during an NFL game is very expensive. So automakers are now shifting their advertising. To streaming services, advertising on streaming is cheaper and it also lets the companies target their customers by zip code. Not to mention the ads being produced for these streaming services are a lot cheaper to make. Instead of hiring a celebrity or shooting a whole cinematic masterpiece where a pickup truck drives through the mountain in slow motion, you can just film your local dealer screaming into the camera about a fall sales event or something. And honestly, I probably bet that commercial is a lot more effective too. But don't feel so bad for the NFL and the networks. Ad slots previously filled by the automakers are now being filled by the pharma companies and sports betting companies. Also, there's a lot of political ads right now. I mean, you can't watch football without getting bombarded with back-to-back-to-back negative ads. See, I can't wait for these midterms to end so we don't have to see those anymore. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's episode. If you did and you have like five extra seconds, consider giving us a five-star rating on Apple, Spotify, YouTube, wherever you listen to your podcasts. And if you are listening on Spotify, just another reminder, please consider voting in today's Spotify poll. You know, all that engagement really does help us out and it helps other people find the show. Thank you guys so much for listening, watching, and commenting. Shout out to Mike and V. For all the work behind the scenes. And we'll see you guys back here tomorrow.