Astera Labs made an impressive debut on the stock market as its shares surged 46% from its initial public offering price of $36 to $52.56 per share when trading began. Its IPO price was set above its raised price range, making it the first significant technology offering of the year for TechCrunch.
The company, which specializes in connectivity hardware for cloud computing data centers, has seen its revenue soar due to the high demand for AI and the massive amounts of data it requires to be moved in and out of data centers. Its revenue increased by 45% from $79.9 million in 2022 to $115.8 million in 2023.
Since the start of trading, Astera’s shares have continued to climb and are currently around $55.73, representing a gain of approximately 54%. While some may argue that the company was mispriced and left money on the table, its successful debut may encourage other private tech companies to consider going public.
With an IPO price that valued the company at $5.5 billion, its current trading price puts its market value at around $8.9 billion. Additionally, its fully diluted valuation is even higher, but what matters most is that it surpassed its final private price in its IPO and has since exceeded it significantly.
A quiet winner
While the hype surrounding Astera Labs’ public offering is not as loud as that of Reddit’s IPO, it serves as a litmus test for the market’s appetite for AI shares. Although Reddit’s data business, which is powered by AI, is a growing part of its operations, it only makes up a small percentage of its projected 2023 revenue, according to TechCrunch’s analysis.
On the other hand, AI has played a significant role in driving Astera’s growth and is expected to continue doing so in the future. The company’s accelerated growth in the fourth quarter of 2023 and its shift from loss to GAAP profitability during that period further solidify its position as a company riding the AI wave. And while its work may not be as headline-worthy as that of OpenAI and its competitors, it still benefits from the AI trend.
“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 IPO performance can also serve as a barometer for how venture-backed companies will fare when they go public this year. While Reddit is also backed by venture capital, its financial history is a bit different as it was previously acquired and spun out. Astera, on the other hand, was founded in 2017 and has raised $206 million in funding, with its last valuation at $3.1 billion. This makes it a more relevant comparison to other highly anticipated IPOs like Databricks, Stripe, and Plaid.
What’s next for Reddit?
As Astera’s closing price on its first day of trading could potentially have a positive impact on AI hardware companies, it could also pave the way for Reddit’s IPO. If Astera had stumbled on its debut, it could have had a negative effect on Reddit’s upcoming listing.
However, with Astera delivering 2021-style first-day trading results, could Reddit follow suit?
The strong performance of Astera as a newly public company may also alleviate some of the hesitation among investors that has been hindering or even preventing some companies from going public. As TechCrunch reported earlier this week, some late-stage startups may not be able to go public if their last primary valuation is below the IPO price, even if the founders are willing. This is due to contractual terms that give investors the power to veto the deal if it will dilute their stake in the company.
If VCs know that the startup could pop on the public market like Astera Labs, maybe they will think about the timeline differently.
