Astera Labs rides on Amazon's billion-dollar AI order express, but UBS only gives an initial "Neutral" rating: High growth faces significant competitive pressure
UBS has given Astera Labs a "Neutral" rating for the first time, with a target price of $180. Influenced by Amazon's $10 billion deal with Anthropic, Astera Labs' stock price rose by 9.2%, closing at $191.97. UBS analysts noted that although the company has performed well with its re-timing products and has an optimistic growth outlook for the next 2-3 years, its entry into the highly competitive PCIe switch market and high valuation keep its rating at Neutral. It is expected that by 2027, Astera Labs' revenue will exceed market expectations by 4%
According to Zhitong Finance APP, boosted by the news that its major client Amazon (AMZN.US) signed a $100 billion deal with Anthropic, Astera Labs (ALAB.US) saw its stock price rise 9.2% on Tuesday, closing at $191.97. UBS initiated coverage on this artificial intelligence network supplier with a "Neutral" rating and a target price of $180.
The UBS analyst team, led by Natalia Winkler, noted in an investor report: "Since launching its re-timing products in 2019, Astera Labs has successfully maintained its market share with Amazon and has taken steps to expand the application of its products in other hyperscale data centers, which fully demonstrates the quality and execution of its products. Based on our bottom-up re-timing sales forecasts and discussions with experts, we are optimistic about Astera Labs' growth prospects over the next 2-3 years, expecting its revenue in 2027 to be 4% higher than market expectations, with the main growth drivers coming from re-timing and its scalable PCIe/UA Link switch product portfolio."
However, Astera Labs' entry into the increasingly competitive switch market, along with its high valuation, prompted UBS to assign it a "Neutral" rating. Winkler stated: "The next phase—entering the PCIe switch market (starting in Q2 2025)—brings significantly higher competitive risks. While the PCIe switch market is approximately four times the size of the re-timing market, it also has strong existing players like Broadcom (AVGO.US) and Microchip Technology (MCHP.US), which hold over 50% of the market share, as well as new entrants like Marvell Technology (MRVL.US). We predict that by the end of this decade, Astera Labs' market share will reach about 25% (currently less than 5%), but it will need to continuously and effectively respond to competition."
