8. Astera Labs Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 51
Upside Potential as of February 19: 39.91%
Astera Labs Inc. (NASDAQ:ALAB) leads semiconductor-based connectivity solutions and specializes in intelligent technologies for cloud and AI infrastructure. Through its sophisticated connectivity platform, including smart fabric switches, DSP retimers, and the COSMOS software suite, it empowers hyperscalers and OEMs to optimize and manage large-scale deployments. This drives the advancements in AI and cloud computing.
On February 11, Needham’s Quinn Bolton reiterated a Buy rating with a $140 target for the company. This sentiment came from its strong performance and growth potential. Its Q4 2024 results beat expectations with a 25% quarterly and 179% year-over-year increase. Revenue jumped 242% for the full year 2024. This was driven by Taurus SCMs, Aries SCMs, and Aries PCIe retimers, which demonstrate product diversification. All of these are the company’s high-speed connectivity solutions designed to enhance data transfer within AI and cloud infrastructure.
The company is also developing Leo CXL controllers and Scorpio Smart Fabric Switches, with Scorpio projected to become its largest product line, targeting the expanding AI fabric market. These new developments are expected to optimize data flow and interconnectivity within AI systems. Hyperscaler investments in AI and cloud infrastructure are fueling Astera Labs Inc.’s (NASDAQ:ALAB) growth. It’s involved in the development of the Ultra Accelerator Link (UA Link), which is an open standard for AI cluster interconnects. The company now projects FQ1 2025 revenues between $151 million and $155 million and expects Scorpio products to contribute at least 10% of this 2025 revenue.
Alger Small Cap Growth Fund highlighted the company’s strong performance which was driven by its innovative connectivity solutions for data-centric systems and exceeding analyst expectations in recent results. The fund stated the following regarding Astera Labs Inc. (NASDAQ:ALAB) in its Q4 2024 investor letter:
“Astera Labs, Inc. (NASDAQ:ALAB) is a semiconductor company specializing in connectivity solutions for data-centric systems, including cloud computing, artificial intelligence, and machine learning. Its products optimize data flow and performance in servers, GPUs, and AI accelerators, addressing bottlenecks in high-performance computing environments. The company’s Intelligent Connectivity Platform (ICP) integrates advanced semiconductor hardware with the proprietary COSMOS software suite, delivering customizable and cost-effective solutions. Astera’s Platform-Specific Standard Products (PSSP) enhance flexibility with features such as predictive analytics, monitoring, and troubleshooting. Backed by strong relationships with leading cloud and AI providers, we believe Astera is well positioned in rapidly growing markets, demonstrating high profitability and industry-leading gross margins. During the quarter, shares contributed to performance after reporting better-than-expected fiscal third-quarter results, with revenues and gross margins exceeding analyst estimates. Specifically, revenue growth spanned all four product segments, led by accelerated custom silicon sales and robust GPU demand. Management also raised fiscal fourth-quarter guidance, citing expanding product ramps and a broader customer base.”
