Proactive Investors - A wave of initial public offerings (IPOs) from AI and AI-related businesses is on the horizon as these companies reach maturity in the private domain and then turn to public markets for further growth.
In its quarterly IPO trends report, analysts at global professional services firm EY highlighted that most AI and AI-related companies are in the seed or early stage of venture capital (VC) rounds, with just 1% having completed IPOs.
The analysts consider AI companies to be firms engaged in AI, machine learning, AI or ML semiconductors, AI autonomation platforms, autonomous vehicles, computer vision, foundation models, intelligent robotics, and natural language technology.
They noted that these companies, mostly from the United States, operate across a range of areas, including technology, health and life sciences, and consumer products.
Just 3% of AI and AI-related companies are in the private equity (PE) phase and 7% are in the late VC stage, per EY’s analysis.
More than one-third, 35%, are in the early VC stage and more than half, 54%, are in the seed stage.
“The promise and reach of AI is experiencing significant growth within the private realm,” EY wrote in its report.
“The quantity of these companies in seed or early-stage VC rounds vastly exceeds those in the late stage of VC rounds or PE phase, which exemplifies where AI and AI-related firms are developing within the private runways.”
The report noted that early AI market entrants capture investor interest because they provide insights into how markets view AI startups.
It pointed to Astera Labs, a firm that specializes in connectivity hardware for cloud computing data centers, which saw its stock jump 72% after its March debut at an increased valuation.
Astera Labs shares traded hands at $73.50 on Wednesday, up almost 105% from their IPO price of $36.
“It indicates the possibility for AI companies to simultaneously foster growth and generate revenue. As companies transition from VC backing to public listings, they are expected to enhance their revenue base to meet valuation metrics,” EY wrote.
“Should Astera maintain robust market interest following its IPO, this momentum may pave the way for an increase in AI-related public offerings.”
AI companies tipped to go public in 2024:
- Cerebras has reportedly tapped Citi to lead an IPO, which will take place in the second half of 2024 at the earliest. The designer of semiconductor chips for AI applications was last valued at $4.2 billion after a 2021 fundraising round.
- Stripe’s long-anticipated IPO is widely expected to happen in 2024. The payments infrastructure firm has been integrating AI into its offering, including through a collaboration with OpenAI for its natural language technology GPT-4. The firm in March was valued at $65 billion, up from $50 billion last year but still significantly below its peak $95 billion valuation achieved in March 2021.
- Synthego, despite not yet making any public announcement regarding an IPO, is also expected to debut this year, according to a Pitchbook analysis. The drug discovery and medical research company, which uses AI and ML in its genomic engineering platform, is valued at $1.2 billion, per Pitchbook.