We recently compiled a list of the 10 AI Stocks That Will Skyrocket. In this article, we are going to take a look at where Astera Labs, Inc. (NASDAQ:ALAB) stands against the other AI stocks.
DWS, an expert in active, passive, and alternative asset management, believes that expectations around the usage of Artificial Intelligence (AI) across industries acted as one of the critical stock market drivers over the previous 2 years. In 2025, AI developments are expected to make significant strides throughout various domains. The firm anticipates a shift from generalized applications to industry-specific solutions. Notably, companies are expected to refine their strategies to target specific use cases providing measurable results.
Generative AI CapEx Will Continue to Increase, Says DWS
DWS, while quoting Bloomberg estimates, highlighted that some of the big technology firms can collectively increase capex to ~$200 billion in 2025. More than $90 billion in incremental capital spending in 2024-25 vs. 2023 is projected to be earmarked mainly for expanding Gen AI infrastructure. On a related note, Goldman Sachs Asset Management believes that the AI capex from well-established hyperscalers is projected to surpass $250 billion in 2025. This hints at optimism that hyperscalers remain confident in the ROI (Return on Investment) they will witness from such significant investments.
DWS sees the de-globalization movement spreading to data and AI, with countries spending a significant amount to subsidize “sovereign AI.” To provide a brief overview, it refers to a nation’s capabilities to establish, control, and deploy its own AI technologies. It spans both physical and data infrastructures. Notably, in the past year, the governments of the US and China have pledged $40 billion – $50 billion each dedicated towards AI investments.
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Key AI Trends to Watch Out
Appinventiv believes that conversational AI, Predictive Analytics, AI Democratization, Agentic AI, and Generative AI, among others, are some of the key trends to watch out for. While conversational AI focuses on streamlining customer interactions, generative AI has been revolutionizing content creation across fields including healthcare. Additionally, multi-modal Al remains one of the most popular AI trends in business. It focuses on leveraging machine learning trained on multiple modalities, including speech, images, and traditional numerical data sets. As a result, there will be a more holistic and human-like cognitive experience.
Appinventiv opines that companies can capitalize on multi-modal Al and develop intelligent systems analyzing diverse data streams, which can help improve natural language understanding and voice recognition for better user experiences.
Our Methodology
To list the 10 AI Stocks That Will Skyrocket, we sifted through several online rankings and shortlisted the companies catering to the broader AI sector. Next, we chose the ones that analysts see significant upside to. Finally, the stocks are arranged in ascending order of their average upside potential, as of February 24. We also mentioned hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company’s production equipment.
Astera Labs, Inc. (NASDAQ:ALAB)
Average Upside Potential: 60.0%
Number of Hedge Fund Holders: 51
Astera Labs, Inc. (NASDAQ:ALAB) is engaged in designing, manufacturing, and selling semiconductor-based connectivity solutions for cloud and AI infrastructure. Its focus on high-performance connectivity solutions for data centers and AI applications placed it well in the dynamic technological landscape. With AI applications becoming increasingly prevalent throughout industries, the demand for high-performance computing and data processing capabilities is projected to significantly increase. Astera Labs, Inc. (NASDAQ:ALAB)’s specialized connectivity solutions are important in enabling the high-speed, low-latency data transfers needed in AI and data center environments.
Furthermore, the company’s close relationship with NVIDIA strengthens its position to benefit from this dynamic market. With the increased AI adoption, Astera Labs, Inc. (NASDAQ:ALAB) can see sustained demand for its products, fueling revenue growth and market expansion. Analyst Blayne Curtis of Jefferies maintained a “Buy” rating on the company’s stock with a price target of $125.00. As per the analyst, Astera Labs, Inc. (NASDAQ:ALAB) exhibited robust performance metrics, mainly with its ASIC ramps which involve major hyperscalers including Amazon and Google. Such developments, along with expected contributions from NVDA custom-Blackwell designs in H2 2025 paint an optimistic outlook.
Therefore, with the continued growth of the AI industry, Astera Labs, Inc. (NASDAQ:ALAB) is expected to benefit from the elevated demand for high-performance chips and connectivity solutions required to aid AI applications, mainly in edge computing and data centers. Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“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.”
Overall ALAB ranks 2nd on our list of the AI stocks that will skyrocket. While we acknowledge the potential of ALAB as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than ALAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
