2. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Funds: 39
Astera Labs, Inc. (NASDAQ:ALAB) specializes in creating connectivity solutions that use semiconductor technology to enhance cloud computing and artificial intelligence (AI) systems.
Astera Labs, Inc. (NASDAQ:ALAB) on November 4, reported impressive financial results for the third quarter of 2024, achieving record revenue of $113 million. This represents a 47% increase from the previous quarter and a remarkable 206% growth compared to the same period last year. Management attributed this success to a new phase of growth driven by multiple product families, particularly in the AI sector, where their solutions are increasingly in demand.
Moreover, the company is expanding its product portfolio with the introduction of the Scorpio Smart Fabric Switches, aimed at addressing complex connectivity needs within AI infrastructure. This new product line is expected to enhance AI server performance and productivity by improving data transfer speeds and efficiency. In addition, the company has also joined the Ultra Accelerator Link Consortium, along with industry-leading hyperscalers and AI platform providers, aiming to develop high-speed, low-latency interconnects for AI workloads.
Looking ahead to Q4, Astera Labs, Inc. (NASDAQ:ALAB) anticipates continued revenue growth, estimating between $126 million and $130 million. The company is well-positioned to capitalize on the increasing importance of connectivity in AI applications, especially as AI models become more complex and require faster data processing capabilities. It is one of the most promising new technology stocks according to hedge funds.
Baron Discovery Fund stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q2 2024 investor letter:
“AI models are rapidly moving from objects of curiosity to levels of functionality that just a couple of years ago were believed to exist only in the realm of science fiction. We obviously do not invest in large-cap companies that produce AI hardware, which is where significant market attention is focused right now. Yet we continue to look for exciting small-cap ideas in AI hardware. For example, we owned a small-cap AI-oriented semiconductor company in the second quarter called Astera Labs, Inc. (NASDAQ:ALAB). Astera Labs manufactures analog semiconductors that facilitate improved communications within a motherboard (for example between graphics processing units like what NVIDIA makes and central processing units which are made by companies like Intel), and between servers. We bought shares when the company went public, but due to the incredible hype surrounding hardware-based AI companies, the stock quickly doubled and exceeded what we believed was a reasonable long-term valuation (particularly given new competitive offerings on the horizon). Therefore, we sold our investment but continue to monitor its valuation closely for a potential re-entry point.”
