Amazon hits the jackpot! “Little Nvidia” Astera makes a strong debut, surging 72% on its IPO and heating up the technology industry IPO market.

By admin Mar 21, 2024

As Amazon CEO Andy Jassy stated, Amazon has indeed benefited significantly from the artificial intelligence (AI) trend. On Wednesday (20th), Amazon once again benefited from AI in a different way through the IPO of Astera Labs, known as the “Little Nvidia.”

Semiconductor startup company Astera Labs, founded in 2017, went public on Wednesday on the Nasdaq under the ticker symbol ALAB, priced at $36 per share. The stock price surged by 72.53%, closing at $62.11, with a market value approaching $9.5 billion.

AI Unicorn – Astera Astera focuses on solving data center performance bottlenecks, specializing in AI hardware. One of its core products is data center interconnect semiconductors. Due to the movement of large amounts of data within and around data centers for AI applications, Astera has seen a recent surge in revenue. After reaching $79.9 million in revenue in 2022, revenue is projected to increase by 45% to $115.8 million in 2023.

Investment Point of View: Every Nvidia H100 chip requires Astera because high-performance chips demand high data transfer speeds and efficiency. To fully leverage the capabilities of such high-performance GPUs, data centers need to use Astera Labs’ connectivity technology to ensure fast and reliable data transmission within the system. Analysts point out that the demand for Astera Labs’ data center interconnect semiconductors is experiencing explosive growth, similar to Nvidia’s GPUs, despite Astera’s relatively smaller scale.

In its IPO filing submitted to the SEC, the term “AI” was mentioned 271 times, highlighting the company’s efforts to convince investors that they will ride the wave of the AI trend.

Astera’s IPO caters to Wall Street’s desire for AI, and the upcoming listing of Reddit, which holds AI social data, is also eagerly anticipated.

Amazon and Astera Amazon is a major client of Astera Labs and entered into a warrant agreement with Astera in 2022, allowing them to purchase up to 1.5 million shares of Astera stock at a price of $20.34 per share. The following year, the agreement was amended to allow Amazon to purchase an additional 830,000 shares. As of the end of last year, Amazon controlled 232,608 shares.

Based on Astera’s closing price on Wednesday, the total value of Amazon’s stock and warrants is close to $144 million. Amazon (AMZN-US) rose 1.28% on Wednesday, closing at $178.15 per share.

However, according to the agreement, in order for Amazon to realize the remaining shares and fully benefit from the stock’s rise, Amazon must purchase Astera products worth up to $650 million within 7 years starting from 2022. This represents a significant revenue stream for Astera, which had revenue of only $115.8 million last year.

According to Astera’s IPO prospectus, the three types of products that Amazon agreed to purchase are all aimed at addressing “key bottlenecks in AI infrastructure.”

As investors eagerly anticipate the listing of social media company Reddit on the NYSE on Thursday, Astera has entered the public market, heating up the technology IPO market that has been dormant since late 2021 (with few IPO activities such as Arm Holdings, Instacart, and Klaviyo).

Wall Street analysts believe that the full AI potential of Astera and its long-term success are still subject to debate. “Astera is not entirely an AI company, but it does benefit from the AI trend,” analysts say.

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