We recently published a list of Top 10 Buzzing AI Stocks Now. Since Astera Labs Inc (NASDAQ:ALAB) ranks 10th on the list, it deserves a deeper look.
Following the aggressive rate cut by the Federal Reserve, the market roared to new highs but quickly lost enthusiasm as investors look for clues on what might be ailing the economy that pushed the Fed to go more dovish than expected. However, others think the bull market is going to continue.
BMO Capital’s Brian Belsk has raised the S&P 500 target for 2024 to 6,100 from 5,600. Talking to CNBC in a latest program, Belsk said the “resiliency” of this bull market is “undoubted.”
The analyst said that the stock market is going higher through the end of this year.
“We do believe that the Fed is doing a great job. We believe the Fed that we are not hitting into a recession. We believe the Fed that we are heading into more of a soft landing,” the analyst said.
Belsk thinks we are in the “1995-1996 environment” where we can “handle” the 24x earnings multiple.
The analyst added that the Mag. 7 stocks underperformed the market in the third quarter and yet the broader market grew, which shows the market rally is broad.
For this article we chose 10 AI stocks trending on the back of latest news, earnings and analyst ratings. With each stock we have mentioned the number of hedge fund investors. 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).
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Astera Labs Inc (NASDAQ:ALAB)
Number of Hedge Fund Investors: 19
Ankur Crawford, Alger executive VP, while talking to CNBC in a latest program said that in about 3 to 5 years AI is going to provide us with superhuman intelligence.
“All of the CapEx being spent today is whole-heartedly justifiable because the opportunity to monetize that AI by that time is beyond what anyone has contemplated in the market so far.”
Ankur Crawford believes Astera Labs Inc (NASDAQ:ALAB) is one of the top underappreciated AI stocks, according to CNBC.
Astera Labs (NASDAQ:ALAB) was upgraded to “Overweight” from “Equal-weight” by Morgan Stanley. The firm cited artificial intelligence connectivity solutions and a more attractive valuation following a recent price drop for its bullish outlook on the company.
Morgan Stanley set a price target of $55.
Analyst Joseph Moore noted the stock is trading 50% below post-IPO highs due to concerns over GB200 content. He sees this as a compelling entry point, citing confidence in the company’s growth prospects and management’s execution capabilities.
Astera Labs, which focuses on data center connectivity, counts major hyperscalers, AI accelerator vendors, and system OEMs as customers. Moore highlighted that while Nvidia’s (NVDA) rackscale solutions may see reduced demand for Astera’s retimer content, other in-house chips from hyperscalers like Amazon (AMZN), Google (GOOG), and Meta (META) are gaining momentum this year. He added that Amazon appears to have the closest ties to Astera Labs Inc (NASDAQ:ALAB) through warrant agreements.
Astera Labs Inc (NASDAQ:ALAB) Intelligent Connectivity Platform is a high-speed, mixed-signal suite that includes complementary software. These solutions are for hyperscalers, which need robust and fast connectivity to support increasing compute power demands.
Astera Labs Inc (NASDAQ:ALAB) has quickly become a favored partner for many original equipment manufacturers (OEMs) and hyperscalers, with numerous design wins. Customers appreciate the company’s efficient connectivity, fast deployment, and real-time monitoring capabilities.
Astera Labs Inc (NASDAQ:ALAB) has experienced rapid growth, with revenue rising 45% from $80 million in 2022 to $116 million in 2023. At the same time, operating losses were reduced by more than half to $30 million.
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.”
Overall, Astera Labs Inc (NASDAQ:ALAB) ranks 10th on Insider Monkey’s list titled Top 10 Buzzing AI Stocks Now. While we acknowledge the potential of Astera Labs Inc (NASDAQ:ALAB), our conviction lies in the belief that 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.
