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The tech industry’s first major public offering of the year exceeded expectations today, while the second priced at the top end of its target range to raise more than $500 million. 

Astera Labs Inc., a supplier of chips for cloud data centers, raised $712.8 million in its IPO late Tuesday by selling 19.8 million shares. The shares fetched $36 each, well above the $27 to $30 the company had originally sought. Astera’s stock price climbed more than 72% in its trading debut on the Nasdaq today.

Social network Reddit Inc. also saw its stock surge on its New York Stock Exchange debut Thursday morning, as shares rose 38% over their initial offering price, which was already at the top end of its target range set Wednesday evening. At $47 a share, the market capitalization was about $9 billion.

Santa Clara, California-based Astera sells chips for extending the range of data center networking cables. Cables equipped with the company’s silicon can be used to link together the components of artificial intelligence server clusters. Astera also makes modules that allow processors to more quickly move data to and from memory, which boosts performance.

The company’s chips are used by all the major public cloud operators. In the filing for this week’s IPO, Astera detailed that customers have purchased millions of chips to date and accelerated their purchases over recent quarters. The company’s sales consequently jumped 44.9% year-over-year in 2023, to $115.8 million, while its losses shrank by more than 50%.

Astera’s IPO filing gave investors several reasons to believe this strong revenue growth could continue, which may partly explain its strong stock market performance today.

The company detailed that it anticipates an increase in attach rates going forward. That’s a metric used to track situations where a customer buys one type of product and then purchases additional offerings from the same supplier. Additionally, Astera’s IPO filing argued that its technology could find use beyond data centers in systems such as self-driving vehicles, which would unlock additional revenue streams for the chipmaker.

“The bottleneck for AI deployments in the cloud has shifted from computing performance to connectivity,” Astera’s founders wrote in a letter attached to the IPO filing. “We see a transformative opportunity to provide foundational connectivity solutions to unlock the potential of cloud and AI infrastructure and scale one of the most significant technological advancements of our time.” 

Reddit, the other major tech company with an IPO this week, filed to go public in late February. The company later updated the paperwork to indicate it was hoping to offer its shares for $31 to $34 million a piece. On Wednesday evening, Reddit sold 15.28 million shares at the top end of that range and raised $519 million.

At that price, the IPO valued the company at about $6.5 billion, below the $10 billion private valuation it received following a 2021 funding round. Reddit shares are set to begin trading on Thursday under the ticker symbol “RDDT.” The offering marks the first major social media IPO since Pinterest Inc.’s 2019 stock market listing, which netted $1.43 billion at a $10 billion valuation. 

Photo: Robert Hof/SiliconANGLE