Things have gone from bad to worse for ALAB stock, but May 7 may be turning point

Astera Labs, once hailed as one of Wall Street’s most promising semiconductor plays, has gone off the rails lately.

A combination of steep valuation, heavy reliance on China-linked suppliers, and fallout from the U.S.-China trade war has sent shares of the AI-focused chip developer tumbling more than 55% year-to-date.

Best known as a top supplier to Nvidia (NVDA), Astera Labs (ALAB) surged following its IPO, with shares more than tripling in the fourth quarter of 2024.

At its December peak, the company reached a market cap of $22.5 billion. Today, that figure has fallen below $10 billion.

While the company posted explosive revenue growth — including a 179% year-over-year gain to $141.1 million in Q4 — that momentum hasn’t been enough to offset a string of setbacks.

Morgan Stanley downgraded the stock earlier this year over valuation concerns, and growing fears over concentration risk have further soured sentiment.

Too dependent on Nvidia and China

Roughly 70% of Astera’s revenue comes from just three customers, one of them being Nvidia — which is now grappling with a U.S. export ban on its most advanced AI chips to China.

That restriction is expected to cost Nvidia $5.5 billion in revenue this quarter alone, raising the risk of collateral damage for suppliers like Astera.

Astera Labs also faces direct exposure to China.

The company operates a Shanghai office and works with several regional partners, including Taiwan Semiconductor Company (TSMC), EDOM Technology, and Iron Technology on the mainland.

Even before the trade war escalated in April, the company wasn't in the best shape.

TSMC had reportedly been struggling with extended shipping delays, and now, freight disruptions linked to the trade conflict are prompting some U.S. companies to pull out of China altogether.

While Astera hasn’t reported any canceled shipments, the broader trend doesn’t bode well for firms with China-based operations.

Investors will be watching Astera Labs’ next earnings report closely.

The company is scheduled to report on May 6, and Zacks Investment Research expects a return to profitability, with first-quarter EPS projected at $0.06.

With valuation risk, geopolitical tension, and concentration concerns all converging, that report could determine whether Astera Labs stabilizes or slides further.