ALAB: Connecting the Future of AI

Astera Labs: An Emerging AI Leader

Zacks Rank #1 (Strong Buy) stock Astera Labs (ALAB) is a fabless semiconductor company that develops “purpose-built connectivity solutions for rack-scale AI and cloud infrastructure. In other words, they build the “nervous system” that allows powerful components in an AI server, like GPUs, CPUs, and memory, to communicate with each other effectively.  ALAB operates a fabless business model, which means they focus on the design of the chip and software but outsource manufacturing to third-party chip makers like Taiwan Semiconductor (TSM).

ALAB: Providing A Solution to AI Scalability

As investors have learned over the past few years, the demand for AI models and the components that ‘train them’ has grown exponentially. AI capital expenditure (CAPEX) spending among major tech companies like Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META), and Alphabet (GOOGL) is expected to be in the $400 billion range for full-year 2025 as big tech juggernauts race to keep up with soaring demand for AI compute power. However, as data center size and complexity have exploded, these companies must move beyond single-server architecture. This is where ALAB comes in. Astera Labs technology is the new industry standard. The technology allows “rack-scale” AI, where multiple servers can act in concert, alleviating data transfer bottlenecks and producing rapid, efficient, and reliable connectivity.

ALAB Earnings are Exploding

The aforementioned growing speed requirements and system complexities of AI and cloud infrastructure bode well for Astera Labs. ALAB’s recent earnings history illustrates that the company has already emerged as a leader in next-generation data center connectivity. In fact, ALAB has beat Zacks Consensus EPS Estimates for four straight quarters, with a juicy beat margin of 32.2%.

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Meanwhile, Wall Street analysts believe that ALAB’s products will continue to be in high demand well into the future. Several analysts tracked by Zacks Investment Research have upped estimates over the past two months, and these analysts expect the company to grow full-year EPS by a robust 88.10% in 2025 and 24.14% in 2026.

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ALAB Technical View: Post-EPS Drift Potential

ALAB’s price and volume action are jiving with its robust fundamental picture. ALAB shares bolted ~29% in early August after the company smashed Wall Street expectations. Additionally, volume increased 220% for the session, signaling heavy demand. Since then, ALAB shares have held gains, signaling that bulls are unwilling to part with shares.

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Bottom Line

Astera Labs is uniquely positioned to capitalize on the explosive growth of AI infrastructure. With its groundbreaking technology, the company is addressing critical data bottlenecks inherent in next-generation data centers.

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This article originally published on Zacks Investment Research (zacks.com).

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