Astera Labs (ALAB) might finally be getting back on investors’ radar.
After a rough stretch this spring — thanks largely to the U.S.-China trade war — there’s a shift in tone from Wall Street analysts, suggesting the tide may be turning.
At the core of investor concerns was Astera’s close connection to China.
The company operates an office in Shanghai and works with several major suppliers from the region, including TSMC, EDOM Technology, and Iron Systems.
Another issue was Astera’s heavy reliance on Nvidia (NVDA), which brings its own risks.
Investors generally prefer companies with a diverse customer base, and Astera’s close partnership with Nvidia left some analysts uneasy.
But Wall Street opinions of Astera are starting to shift.
Earlier this year, Morgan Stanley downgraded the stock, saying it looked too expensive. Last week, the firm reversed course and upgraded it to “overweight.”
It largely comes down to price. After this year’s sell-off, Morgan analysts say, Astera has an attractive entry point, even if the stock remains controversial.
Morgan Stanley also said investors have become too negative on AI overall and that Astera’s newer products could support strong growth in the coming quarters.
Analysts at William Blair agree. Last week, the firm initiated coverage on Astera with an “outperform” rating. The sheer coverage initiation is a telltale signal that they see upside ahead.
A big quarter and stronger outlook
Another reason analysts are warming up to Astera again is that the company just posted a strong first-quarter earnings report.
Revenue jumped to $159.4 million, up 144% from a year ago, and up 13% compared to the previous quarter. For the second quarter, the company expects sales to grow even further, landing between $170 million and $175 million.
On top of that, Astera recently announced it is expanding its partnership with Nvidia.
The two companies will now work together on building the infrastructure needed for AI models that are getting larger and more complex by the day.
“To keep pace with rapidly growing AI models which have reached trillions of parameters, AI infrastructure providers must adopt platforms that deliver both high performance and high efficiency,” said Sanjay Gajendra, Astera’s President and COO.
Astera is also expanding its Intelligent Connectivity Platform, which will be used to support Nvidia’s NVLink Fusion technology. Gajendra said the move would help big tech companies — or “hyperscalers” — get to market faster.
The company is also betting on a shift in how data centers are built.
Until recently, companies focused on connecting lots of small servers (“scale-out”). Now more are moving to “scale-up” models where massive computing power is concentrated in one machine.
That means they’ll need far more GPUs and faster internal connections, and that’s where Astera sees an opportunity.
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