Astera Labs prices IPO at $36 a share, well above target range

By Emily Bary

Wall Street is about to get a new way to play the intersection between chips and artificial intelligence.

Astera Labs priced its initial public offering late Tuesday at $36 a share, well above its target range, which it boosted Monday from $27 to $30 to between $32 and $34 a share. With the company intending to offer 19.8 million shares, it will raise $712.8 million through the IPO. Shares are expected to start trading Wednesday on the Nasdaq under the ticker symbol "ALAB."

The company sees big opportunity in chip connectivity, which could prove all the more essential in the AI era. Astera Labs acknowledges that AI chips are great at what they do but says they need to be able to connect and communicate with other things in the data center for maximum efficiency.

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Graphics processing units "and other AI accelerators often sit idle waiting for data to become available," Astera Labs said in its prospectus. "Increasing the utilization of AI hardware presents a large challenge as well as a massive opportunity for connectivity suppliers."

The company makes semiconductor-based connectivity products as well as a software suite that's embedded into those offerings and integrated into customer systems.

Astera Labs notes in its prospectus that it's "integrated into reference and/or commercial designs provided by industry leaders" including Nvidia Corp. (NVDA), Advanced Micro Devices Inc. (AMD) and Intel Corp. (INTC), something that "demonstrates their trust in us as a reliable supplier."

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The company logged a net loss of $26.3 million during 2023, compared with a loss of $58.3 million posted in 2022. Revenue increased to $115.8 million from $79.9 million.

Astera Labs acknowledged a heavy revenue concentration from its largest customers, with its biggest three contributing about 70% to its top-line total during 2023, though no one customer made up more than a third of the company's revenue.

The company flagged that its business is "dependent on design wins," and there can be a lag of up to two years between when the company achieves a win and begins commercial shipments in volume related to that deal.

The business was started in a garage by Jitendra Mohan, Sanjay Gajendra and Casey Morrison, all of whom continue to be involved at the company.

-Emily Bary

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03-19-24 2149ET

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