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Astera Labs extends gains after stellar debut as investors lap up AI stocks

By Arsheeya Bajwa

(Reuters) - Astera Labs surged more than 16% on its second day of trading on Thursday, as euphoria over artificial intelligence continued to power the stock, putting the chipmaker on course to add about $1.5 billion in market value.

Companies that make high-powered chips used in AI have been the biggest beneficiaries of a surge in demand as businesses race to adopt the technology.

Astera shares rose to $72.15, after closing at $62.03 on the debut day — a 72% jump from its initial public offering price of $36.

"Investors' enthusiasm for the chip sector is intensifying, as they start to grasp the transformative potential of the AI revolution on earnings," said Brandon Michael, analyst at investment management firm ABC Funds.

The Philadelphia SE Semiconductor Index rose 3.1%, adding to its gains of more than 18% so far this year. The index, which includes Astera's competitors and top chipmakers such as Broadcom and Marvell Technology, had risen more than 64% in 2023.

Astera, which sells high-speed data transfer technology for AI computing and other data center applications, is currently not part of the index.

The company, along with some of its existing investors, raised $712.8 million by selling 19.8 million shares at $36 each in its upsized IPO.

"The equity valuation multiple such as enterprise value-to-sales is excessive for Astera Labs, and many times higher than Nvidia, reflecting the limited supply of pure plays on AI ... so the Astera Labs IPO taps into this demand," said Peter Garnry, head of equity strategy at Saxo Bank.

Memory chipmaker Micron Technology also surged 16% to a record high, after its strong revenue forecast offered more evidence on AI's potential to drive demand for semiconductor firms.

Shares of Broadcom rose close to 8%, while Marvell and Nvidia were up between 1% and 4%.

Nvidia also makes InfiniBand, which works like an ethernet cable, linking clusters of chips across servers, and competes with networking offerings of Broadcom and Marvell.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)