Amazon gets 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 artificial intelligence boom. On Wednesday, Amazon got an AI boost in a different way.

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

Astera’s IPO plays into Wall Street’s thirst for all things AI. Founded in 2017 by ex Texas Instruments executives, Astera counts Nvidia, AMDand Intel among its customers. It also sells strongly on Amazon.

The company received a large 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 stock at $20.34 apiece. The following year, the agreement was amended, giving Amazon a warrant to buy more than 830,000 additional shares. As of the end of last year, Amazon controlled 232,608 shares, according to securities filing.

Based on Wednesday’s closing price, Amazon’s stock and warrants are worth a total of nearly $144 million.

But for Amazon to appropriate its remaining shares and take full advantage of the price jump, it must buy up to $650 million worth of Astera products in the coming years, according to the agreement. That’s a lot of money for Astera, which posted total sales last year of $115.8 million, up from $79.9 million in 2022.

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

Astera joins the public markets as investors eagerly await social media company Reddit’s planned New York Stock Exchange debut on Thursday. The tech IPO market has been largely dormant since late 2021, with Arm Holdings, Instacart and Clavio among the very few who held donations in this section.

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