We recently compiled a list of the 10 AI Stocks to Watch Amid the DeepSeek Buzz. In this article, we are going to take a look at where Astera Labs, Inc. (NASDAQ:ALAB) stands against the other AI stocks.
US stocks plummeted on Monday following the news of a new artificial intelligence app from a Chinese startup, DeepSeek. Major chip firms were amongst the hardest hit in the AI frenzy, erasing more than a trillion dollars in market cap. The AI model by DeepSeek, developed with fewer chips and lower costs, has sparked fear on Wall Street after it was known to outperform OpenAI’s ChatGPT on several benchmarks.
This frenzy was further fueled by the news that DeepSeek’s AI assistant app has become the most downloaded free app on the Apple store in the United States. Powered by DeepSeek-V3, DeepSeek’s AI assistant has overtaken rival ChatGPT, the innovation by OpenAI that started the AI arms race in the first place.
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Following the news of DeepSeek topping the charts, the Chinese startup said it will limit its registrations due to a cyber-attack. Before the attack, the company was also hit by a major outage on its website. According to the company’s status page, it had resolved issues relating to its application programming interface and users’ inability to log in to the website. This outage was known to be its longest in 90 days.
While the AI world remains in a state of panic, analysts have been having differing views on the innovation. Some are worried about its impact, while others are taking it on a positive note. Wedbush, for one, isn’t worried about DeepSeek disrupting the planned $2 trillion in capital expenditures anticipated on AI in the coming years. They say that they “view the DeepSeek fear across the tech world as in essence a ‘tech AI head fake’ that will be short-lived.
“DeepSeek created an awesome LLM model (and credit to its software developers) however this Chinese AI small lab/LLM model is not bringing down the entire US tech ecosystem with it”.
– The analysts wrote.
Raymond James believes that these AI innovations can reshape the tech world, lowering costs significantly and reducing the need for massive GPU/XPU clusters at US hyperscalers.
“If DeepSeek’s innovations are adopted broadly, an argument can be made that model training costs could come down significantly even at U.S. hyperscalers, potentially raising questions about the need for 1-million XPU/GPU clusters as projected by some”.
-Raymond James analyst Srini Pajjuri wrote in a note to clients over the weekend.
In turn, Web3 entrepreneur Jeffrey Emanuel is saying that DeepSeek’s success “suggests the entire industry has been massively over-provisioning compute resources”.
Then there are also some experts, such as one Oxford professor, who is advising against putting private data on the DeepSeek platform in case it could be shared with the Chinese state.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A robotic arm placing a semiconductor chip on a test contactor.
Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 39
Astera Labs, Inc. (NASDAQ:ALAB) is engaged in designing, manufacturing, and selling semiconductor-based connectivity solutions for cloud and AI infrastructure. On January 28, Northland upgraded Astera Labs (ALAB) to “Outperform” from Market Perform with a $120 price target. According to analysts at Northland, shares of Astera Labs, like most other stocks, fell on Monday because of concerns that big US companies may have invested too much in Artificial Intelligence. DeepSeek had revealed a stunning Chat GPT-like AI model with the company claiming that it had spent just $5.6 million on computing power for its base model. However, the firm believes that demand in the sector will remain robust considering tech giants are most likely not going to cut their capital expenditures, which will in turn act as a catalyst for Astera Labs.
“ALAB shares have declined 38% since our downgrade based on the valuation on 1/2/25. Most of that decline occurred yesterday.” They further stated that “We do not expect AMZN, GOOG, META, and MSFT to cut capex when they report earnings over the next few weeks, acting as a catalyst for the shares.”
Overall ALAB ranks 8th on our list of the AI stocks to watch amid the DeepSeek buzz. While we acknowledge the potential of ALAB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an 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.
