Astera Labs’ IPO pops 54%, showing that investor demand for tech with an AI twist is high
Reading Time: 2 minutesAstera Labs makes connectivity hardware for cloud computing data centers. Because AI requires massive amounts of data moving into, out of and around data centers, Astera has seen recent revenues bloom. After generating $79.9 million in 2022, revenue swelled 45% in 2023 to $115.8 million.
Since trading began, Astera’s shares have continued to climb, reaching $55.73 as of the time of writing, for a gain of around 54%. While the company’s strong early trading will certainly engender critiques that it was mispriced, and that the company left money on the table, its bull-rush into public life may help other private-market tech companies find the courage to list their own shares after a long period of limited IPO activity.
Astera Labs’ IPO price valued it at around $5.5 billion, a figure that swells to around $8.9 billion at its current trading price. Fully diluted valuation figures are higher, but what matters for the company is that it bested its final private price in its IPO pricing, and then trounced the latter figure immediately after.
A quiet winner
In contrast, the AI-led data center buildout that is benefiting Astera Labs makes up what the market may consider a larger portion of its current size, and future growth. The fact that the company’s growth rate accelerated as much as it did in the fourth quarter of 2023 and that it managed to reach swing from a loss to GAAP profitability that quarter underscores the view that it is a company on the move thanks to AI demand. This even though it sits far from the more headline-friendly foundation model work that OpenAI and its rivals are undertaking.
‘They’re not an AI company. But they’re certainly I think, benefiting from that trend,’ said Nick Einhorn, vice president of research at Renaissance Capital, a company that tracks the IPO market and offers public-offering focused ETFs. ‘And I think when you look at the revenue growth, it’s really the most recent quarter is, I think, the most compelling argument for them.’
Astera’s debut will also likely prove a better gauge for how venture-backed IPOs will perform this year. While Reddit was also venture-backed, it has a bit of unique financial past that includes being acquired and spun out. Astera Lab on the other hand, founded in 2017, has raised $206 million in venture capital, and was last valued at $3.1 billion which makes it a better comp for the other names people are keeping an eye on including Databricks, Stripe and Plaid.
Reddit’s up next
The final closing price for Astera shares could provide a positive signal for AI hardware companies, but may also warm the IPO waters for Reddit’s own listing. Had Astera stumbled out of the gate, Reddit might have found itself wounded before it even began to trade.
Instead, Astera is putting up 2021-era first-day trading results — perhaps Reddit can follow?
If VCs know that the startup could pop on the public market like Astera Labs, maybe they will think about the timeline differently.
Ref: techcrunch
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