Astera Labs AI boom hits wall as trade war rattles investors

Astera Labs (ALAB) is coming off a record-breaking year, but that didn’t spare the chipmaker from 2025’s bloodbath.

As President Trump’s trade war rattles markets, ALAB stock has cratered 53% year-to-date, wiping out billions of dollars in market value.

The losses have fully erased Astera’s fourth-quarter rally, which had propelled the stock to an all-time high of $147.39. Since that peak, ALAB is now down nearly 60%.

Although the S&P 500 Semiconductor Index is also mired in a three-week losing streak, its 20% decline barely compares to Astera’s freefall. What gives?

Not your typical chipmaker

Astera’s plunge is hard to rationalize in light of its blowout Q4 earnings. The company posted record revenue of $141.1 million in the final quarter of 2024.

For the full year, sales soared 242% to $396.3 million, with a healthy 76.4% gross margin. Yet, Wall Street wasn’t convinced. In January, Morgan Stanley downgraded ALAB, arguing that the stock had become overextended.

Even then, analysts didn’t predict just how brutal the drop would be. What was once hailed as the "Trump bump" for AI stocks has turned into a massive slump rivaling the 2020 Covid crash.

While Astera Labs falls under the semiconductor umbrella, its real strength lies in connectivity solutions for AI and cloud infrastructure.

The company focuses on eliminating speed and efficiency bottlenecks in data centers, with a client list that includes Nvidia, AMD, Intel, Amazon, and Supermicro.

This puts Astera at the forefront of AI adoption but also at the mercy of shifting market narratives around AI’s trajectory.

Competition and trade war fears are muddying waters

Astera Labs faces a two-fold problem with China: competition and the trade war.

Since the market caught wind of China’s ChatGPT rival, DeepSeek, analysts have raised concerns over future demand for high-end AI semiconductors.

The chipmaker also relies on a limited number of third-party manufacturers and distributors, including Taiwan-based EDOM Technology and China's Iron Technology, for its operations.

Buried in Astera’s 2024 earnings report, the company also flagged “a challenging macroeconomic environment” and “trade barriers, particularly with respect to China” as major risks heading into 2025.

Astera’s own forecast suggests it can manage these challenges, but that didn’t convince investors.

As Paul J. Menchaca of Investors Observer put it, Trump’s indifference toward the stock market has been a wake-up call for Wall Street — and Astera is feeling the pain.