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

Amazon CEO Andy Jassy likes to talk about how much his company is benefiting from the AI ​​boom. On Wednesday, Amazon got an AI boost in a different way.

Shares of Astera laboratories, which sells data center connectivity chips to cloud infrastructure and AI companies, soared 72% in its Nasdaq debut, closing at $62.03. This gives Astera a market capitalization of nearly $9.5 billion.

Astera’s IPO plays to Wall Street’s thirst for all things AI. Founded in 2017 by the former Texas Tools managers, Astera counts Nvidia, AMDAND Intel among its customers. It’s also selling a lot at Amazon.

The company got a major vote of confidence in 2022, when it struck a deal with Amazon that gave the tech giant warrants allowing it to buy up to 1.5 million shares of Astera at $20.34 apiece . The following year the deal was amended, giving Amazon a mandate to buy more than 830,000 additional shares. According to a securities filing, Amazon controlled 232,608 shares at the end of last year.

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

But for Amazon to acquire the rest of its shares and fully benefit from the price increase, it will have to buy up to $650 million worth of Astera products over the next few years, according to the deal. That’s a lot of money for Astera, which last year reported total revenue of $115.8 million, up from $79.9 million in 2022.

The three types of products that Amazon has agreed to purchase are all designed to address “critical bottlenecks in AI infrastructure,” according to Astera’s IPO prospectus.

Astera is joining the public markets as investors eagerly await social media company Reddit’s expected debut on the New York Stock Exchange on Thursday. The tech IPO market has remained largely dormant since late 2021 Arm holds, Instagram AND Klaviyo among the very few who held bids on that stretch.

CLOCK: Reddit is getting closer to an IPO