Astera Labs aims to raise up to $534 million in IPO that's a play on the AI boom

By Ciara Linnane

Connectivity chip and cloud software maker is planning to list on Nasdaq

Astera Labs Inc., a provider of connectivity chips and cloud infrastructure management software, launched its initial public offering on Friday with plans to list on Nasdaq as "ALAB."

The Santa Clara, Calif.-based company will offer 17.8 million shares priced at $27 to $30 each to raise up to $534 million. With 150.5 million shares to be outstanding once the deal closes, the company would have a valuation of $4.5 billion at the top of that range.

Morgan Stanley and JPMorgan are lead underwriters on a team of 12 banks working on the deal.

Proceeds of the deal will be used for working capital and other general corporate purposes, or for acquisitions, should the right opportunity arise.

The company (ALAB) was founded in 2017 and, like many early-stage companies, it's not yet profitable. It had a net loss of $26.3 million for 2023, narrower than the loss of $58.3 million posted in 2022. Revenue rose to $115.8 million from $79.9 million.

A letter from the three founders including in the filing papers explains their early commitment to the promise of AI.

"We believed that AI models would grow large enough to be practical only at cloud-scale. We bet that an exponential growth in AI processing power would be constrained by a fundamental problem: connecting powerful compute elements (e.g., GPUs) at a massive scale to tackle large, distributed AI workloads," the letter says.

While other companies have focused on building accelerators with enormous computing power, Astera decided to address the problem of connecting all of them to deliver the full performance of an AI cluster, it says.

The trio - Jitendra Mohan, Sanjay Gajendra, and Casey Morrison - started the company in true Silicon Valley style, in a garage. From there, they developed three product families, each addressing bottlenecks in AI infrastructure.

Aries helps CPUs and GPUs scale their data input/output bandwidth; Taurus provides AI servers with faster network bandwidth; and Leo enables CPUs and GPUs easily scale their memory bandwidth and capacity.

"Resolving one connectivity bottleneck often turns the spotlight on another, and we continue to march alongside our customers, developing new product families to unlock the true potential of AI," says the letter.

Astera estimates its total addressable market will grow to nearly $27.4 billion in 2027 from about $17.2 billion in 2023. The company's customers include AI darling-du-jour Nvidia Corp. (NVDA), as well as Advanced Micro Devices Inc. (AMD) and Intel Corp. (INTC)

Astera now has 267 employees located in five countries with the bulk, or 205, in the U.S. There are 31 in Canada, 10 in China, seven in Israel and 14 in Taiwan.

The Renaissance IPO ETF (IPO) has gained 6.5% in the year to date, while the S&P 500 has gained 8.1%.

-Ciara Linnane

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03-08-24 1111ET

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