Analysts See Opportunity for Astera Labs (ALAB), but Valuation and Competitive Pressures Weigh

Astera Labs, Inc. (NASDAQ:ALAB) is one of the AI Stocks in Focus on Wall Street. On November 20, Raymond James assumed coverage on the stock with a Market Perform rating and no price target. The firm sees opportunity on ALAB driven by GenAI demand and PCIe leadership. However, shares seem fairly valued and long-term competitive pressures remain.

The firm has acknowledged that Astera Labs is a leading supplier of high-speed connectivity solutions “benefitting from the GenAI megatrend.” Even though substantial opportunities are ahead, it considers risk-reward as balanced.

“Compute intensity and collective operations (required to sync and update LLMs) fuels the traffic among chips, boards, and racks, which necessitates high-speed interconnects in which Astera specializes.”

The firm highlighted how Astera has been the first to market PCIe 5 and 6, with solid share at Amazon and Google. However, competitors like Broadcom, Marvell, and Credo are deemed to be “fast followers.”

Astera’s new Scorpio PCIe fabric switches also boost its market opportunity, and it is also progressing in the Active Electrical Cable (AEC) markets where Credo remains the leader.

The firm has also acknowledged diminished content in NVIDIA’s Blackwell NVL systems, largely offset by custom ASIC growth. However, potential disruptions also exist which are having an impact on the bull thesis.

“Astera’s diminished content in NVIDIA’s Blackwell NVL systems is largely offset by custom ASIC growth with significant content expansion opportunities due to open standards-based, back-end networks, but Ethernet for Scale-Up Networking (ESUN) and co-packaged optics are two potential major disruptive factors to the bull thesis.”

Astera Labs, Inc. (NASDAQ:ALAB) is engaged in the design, manufacture, and selling of semiconductor-based connectivity solutions for cloud and AI infrastructure.

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