Astera Labs stands to get a boost from the ongoing artificial intelligence build-out after being hit by a rotation out of semiconductor stocks, according to BMO Capital Markets. The bank initiated coverage of Astera with an outperform rating. It also put a $375 price target on shares, implying 68% upside from Wednesday’s close. “We see ALAB as a critical AI networking leader in AI infrastructure. Large AI clusters and new architectures create bandwidth/latency/distance requirements,” analyst Harsh Kumar said Wednesday in a note to clients. “ALAB’s four product lines (Aries, Taurus, Leo, and Scorpio) address these rising complexities and solve bottleneck challenges in networking/memory. This drives ALAB content greater than $1K per GPU/XPU accelerator, which continues to expand from new platforms.” Shares of Astera have plunged nearly 30% over the past three months amid a broader rotation out of semiconductor stocks due to rising concerns about the sustainability of the AI trade. The iShares Semiconductor ETF has fallen 15% over the same period. ALAB 3M mountain Shares are down about 30% over the past three months. However, Astera Labs is still well positioned to benefit from “greater content attach rates from ongoing AI/cloud infrastructure deployments,” in the near-term, according to Kumar. It also has a longer-term strategy to lean into optics, racks and custom semiconductor solutions, which should become a greater contributor to its revenue over time, per his note. BMO Capital Markets’ call is in line with consensus on Wall Street. Of the 24 analysts covering Astera Labs, 17 have a buy or strong buy rating on the stock, while seven have a hold on it, LSEG data shows.
