Amazon gets boost from 72% pop in AI company Astera Labs’ IPO

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Amazon’s CEO, Andy Jassy, emphasizes the company’s success with artificial intelligence. On Wednesday, Amazon received an AI boost in a unique way.

Astera Labs, which offers data center connectivity chips to cloud and AI infrastructure firms, saw a 72% increase in its Nasdaq debut, closing at $62.03. That gives Astera a market capitalization of almost $9.5 billion.

Astera’s IPO capitalizes on Wall Street’s appetite for all things AI. Astera, founded in 2017 by former executives from Texas Instruments, has customers including Nvidia, AMD, and Intel. It is also selling well on Amazon.

In 2022, the company received a significant vote of confidence when it reached an agreement with Amazon that granted the internet giant warrants to purchase up to 1.5 million shares of Astera’s stock at $20.34 each. The next year, the arrangement was revised to grant Amazon a warrant to purchase more than 830,000 additional shares. Amazon had 232,608 shares at the end of last year, according to a securities filing.

Based on Wednesday’s closing price, Amazon’s shares and warrants are worth over $144 million.

However, in order for Amazon to vest the remaining shares and fully profit from the price increase, the deal states that it must purchase up to $650 million in Astera products in the future years. That is a lot of money for Astera, which reported total revenues of $115.8 million last year, up from $79.9 million in 2022.

The three types of goods Amazon has decided to purchase are all intended to overcome “critical bottlenecks in AI infrastructure,” according to Astera’s IPO prospectus.

Astera is entering the public markets as investors eagerly await Reddit’s planned New York Stock Exchange debut on Thursday. Since late 2021, the IT IPO market has been mostly stagnant, with just Arm Holdings, Instacart, and Klaviyo listed. Among the few who have held offerings over that period.