Chip company, share price soared 76%

Latest update time：2024-03-21

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Source : Content compiled from Bloomberg by Semiconductor Industry Observer ( ID: icbank), thank you.

Semiconductor connectivity company Astera Labs Inc. raised $713 million in its initial public offering, beating expectations and sending shares up 72% in the IPO, adding momentum to a rally in artificial intelligence-related stocks and listings.

The stock, which sold for $36 a share in the IPO, jumped 76% on Wednesday to close at $62.03, giving the Santa Clara, Calif.-based company a market value of $9.46 billion. Including stock options and restricted stock units, Astera's fully diluted value is $10.4 billion.

It was the largest first-day gain for a U.S. IPO of $500 million or more since June 2021, when shares of Kanzhun Ltd. rose nearly 96% from the IPO price.

Astera and its investors on Tuesday priced the stock above a price target of $32 to $34. The company, whose backers include Intel Corp. and Sutter Hill Ventures, earlier upped the offering and increased the offering size to 19.8 million shares.

The listing is the fourth largest in the U.S. this year, according to data compiled by Bloomberg. Social media company Reddit Inc. is seeking up to $748 million for it and its employees and shareholders in a high-profile stock sale late Wednesday.

Astera co-founder and CEO Jitendra Mohan said in an interview that the company will use the funds raised from the IPO to hire an additional 200 engineers and is considering acquiring the entire engineering team through mergers and acquisitions.

"We have a huge opportunity in front of us but not enough people to do it," Mohan said.

U.S. exchanges have raised more than $7.9 billion through IPOs this year, including Astera's stock sale, according to data compiled by Bloomberg. The data shows an increase of 129% compared to the same period in 2023.

Mohan describes the company's role in the AI ecosystem as "building the connectivity products needed to build AI in the cloud." Asked whether Astera's successful listing would open the window for other technology companies to IPO shares, he said, "If you can IPO, why not IPO?"

Astera's offering was led by Morgan Stanley and J.P. Morgan, with Barclays, Deutsche Bank, Evercore Inc. and Jefferies Financial Group Inc. and six other firms serving as joint underwriters. Astera's shares trade on the Nasdaq Global Select Market under the symbol ALAB.

Founded in 2017, Astera develops semiconductor-based connectivity solutions aimed at "mainstreaming" artificial intelligence and machine learning in the cloud, according to its website. Astera capitalized on investor bullishness toward artificial intelligence, raising $150 million at a valuation of $3.15 billion as part of a 2022 funding round led by Fidelity Management & Research.

Nvidia Corp. and other artificial intelligence-related stocks have soared over the past year, helping stock indexes reach record highs.

In 2023, Astera cut its net loss to $26 million on revenue of $116 million, compared with a net loss of $58 million on revenue of $80 million the previous year, according to its filings.

The company's investors include Intel's venture capital arm. Sutter Hill Ventures is its largest shareholder, controlling 12.6% of the company's stock, according to its SEC filings. Funds owned by Fidelity hold 6.4% of the shares.

Mohan owns 6.1% of the company, while co-founder and chief operating officer Sanjay Gajendra owns 5%, according to the filing.

Micron Technology, up 16%

Memory chip maker Micron Technology said it forecast higher-than-expected third-quarter revenue and reported a surprising quarterly profit as artificial intelligence adoption surges.

Its shares rose more than 16% in after-hours trading and are up more than 60% in the past 12 months. Micron Technology shares last traded around $110 and were on course to close at an all-time high on Thursday.

The strong report and forecast underscore surging demand for high-end memory chips and other advanced semiconductors as big tech companies race to integrate generative artificial intelligence.

Micron Technology CEO Sanjay Mehrotra said that high-bandwidth memory (HBM) chips used to develop complex artificial intelligence applications have been sold out in 2024, and most of the supply in 2025 has been allocated.

AI chip leader Nvidia also uses Micron's latest HBM 3E chip in its next-generation H200 graphics processing unit (GPU). South Korean rival SK Hynix has been the sole supplier of Nvidia's HBM chips.

Micron Chief Commercial Officer Sumit Sadana also told Reuters that the company has signed new customers for its HBM products, but has not yet announced them.

The adjusted profit per share reported Wednesday was the first for Micron Technology after five consecutive quarters of losses, according to the London Stock Exchange.

Analysts expect its share of the high-margin HBM market to grow throughout the year.

Micron provides flash memory chips that serve the data storage market as well as dynamic random access memory (DRAM) made for data centers, personal computers, smartphones and other computing devices.

"Micron's impressive earnings and forecasts suggest that GenAI momentum is driving DRAM and, most importantly, HBM suppliers into an important era of growth," said Bob O'Donnell, principal analyst at Technaanalysis Research.

The company's performance is ahead of other chipmakers and is seen as a gauge of demand for various types of chips and end markets. Its optimistic forecast sent shares of peer Western Digital up 4.6%.

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https://www.bloomberg.com/news/articles/2024-03-20/astera-soars-46-after-713-million-ipo-snapped-up-on-ai-demand?srnd=technology-vp

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