We recently compiled a list of the 10 Stocks Jim Cramer Believes Will Soar. In this article, we are going to take a look at where Astera Labs Inc. (NASDAQ:ALAB) stands against the other stocks Jim Cramer believes will soar.
On a recent episode of Mad Money, Jim Cramer reflects on Wall Street’s favorite GPU maker’s remarkable journey and current status in the stock market. After the sharp decline three weeks ago, caused by the sudden sell-off linked to the yen carry trade, the market is rebounding.
“We’ve had a remarkable run from the lows three weeks ago as we realized that the forced selling caused by the implosion of the yen carry trade is merely temporary.”
Cramer notes that the Federal Reserve’s upcoming rate cuts should support this recovery. However, Wall Street has become more selective, and investors are less forgiving of mediocre results now that the market has rallied significantly.
“Now the Fed is our friend again with rate cuts on the way, starting at next month’s Federal Open Market Committee meeting. At the same time, though, after such a spectacular rally, Wall Street’s gotten a little more discerning. Investors are no longer willing to give companies a pass for less-than-stellar results once we reach more elevated levels. That’s what happens—the exuberance goes away. Now we’re in a tricky moment that feels like a race against time.”
Cramer emphasizes that the current economic climate is uncertain. The economy is slowing, and while the Fed’s rate cuts are expected to help, their impact is unpredictable. The effectiveness of these measures and the extent of the economic downturn remain unclear.
“While the economy is slowing and we know the Fed rate-cut cavalry is riding to the rescue, we just don’t know how effective it will be and how bad things will get before Fed Chief Powell manages to turn the tide—and he will. We need to figure out how quickly the economy will deteriorate and how quickly the rate cuts will work their magic. Both of these are judgment calls, and we don’t necessarily have enough data to decide either way. We never do at this point in what we call the economic cycle.”
Jim Cramer: In my 43 Years on Wall Street, I’ve Never Seen Anything Like This
According to Cramer, Nvidia has captured extraordinary attention from investors. He describes it as a groundbreaking company, now valued at $3.2 trillion, a dramatic increase from $580 billion just 18 months ago. Cramer highlights its dominance in the semiconductor industry and its influence on technology, particularly in artificial intelligence.
“I searched for comparisons and came up grasping at something ethereal to describe this incredible $3.2 trillion company, which was worth just $580 billion 18 months ago. It has captivated not just investors but people far removed from the stock market. It’s almost miraculous how many have had life-changing experiences because of this single stock.”
Despite its impressive achievements, Cramer notes that the stock’s performance will be scrutinized closely. He points out that the company’s quarterly results need to surpass high expectations, including significant revenue beats and strong future guidance.
“But tomorrow, the stock will descend into mere mortality, and I feel compelled to explain why. Why does it hold such a high status, and why can it never fully live up to the hype of its $3.2 trillion market cap based solely on one quarterly report? The quarter is about it beating earnings estimates, topping revenue numbers, and crushing forecasts. The stock has run so high that it needs a $2 billion revenue beat and guidance that’s $2 billion higher than expected, along with a bullish conference call discussing a strong roadmap. And let’s not forget a gigantic buyback because the company has too much cash sitting idle.”
Cramer concludes that the company’s technology is so advanced that it’s difficult to fully grasp its future potential. Despite this, he believes the company’s achievements should be celebrated, and the stock might still hold significant upside surprises.
“The bottom line: I don’t want to be poetic, but it excels in ways that are unmatched. We should celebrate its achievements and bring on those upside surprises.”
Our Methodology
In this article, we examine a recent episode of Jim Cramer’s Mad Money, where he highlighted ten stocks with strong potential for growth. We also analyze hedge fund perspectives on these stocks and rank them according to hedge fund ownership, from the least to the most.
At Insider Monkey we are obsessed with 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 holding a semiconductor chip, emphasizing the precision and quality of the company’s production equipment.
Astera Labs Inc. (NASDAQ:ALAB)
Number of Hedge Fund Investors: 19
Astera Labs Inc. (NASDAQ:ALAB) is a prominent semiconductor company specializing in connectivity solutions for AI and cloud infrastructure. Despite the appealing buzzwords, Cramer was wary of Astera Labs Inc. (NASDAQ:ALAB)’s initial 72% surge and advised caution, as it seemed overpriced.
“The ninth-largest deal of the year is Astera Labs, which makes connectivity solutions for AI and cloud infrastructure—nice buzzwords there, but it sounds enticing. I didn’t like that it spiked 72% right out the gate—I told you so a few days later—just seemed way too expensive.”
Astera Labs Inc. (NASDAQ:ALAB) is well-positioned in a booming market driven by the growth of AI and cloud computing, which fuels high demand for its advanced connectivity products. Astera Labs Inc. (NASDAQ:ALAB) meets the increasing need for high-speed data transfer and modern computing infrastructure, making it a strong player in the evolving tech landscape.
Astera Labs Inc. (NASDAQ:ALAB) has built valuable partnerships and a robust customer base, highlighting its solid market position and potential for future growth. Despite some initial stock volatility due to high valuation spikes, Astera Labs Inc. (NASDAQ:ALAB)’ strategic focus and industry resilience point to promising long-term prospects. As the semiconductor industry grows with technological advancements, Astera Labs Inc. (NASDAQ:ALAB) is set to capitalize on these trends, offering significant value to investors.
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 ALAB ranks 8th on our list of the stocks Jim Cramer believes will soar. While we acknowledge the potential of ALAB as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock 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.
