Astera Labs, Inc. (NASDAQ:ALAB), an AI connectivity specialist, faces a critical market juncture as competition intensifies and lofty valuations test investor patience.
While the company is positioned to tap multi-billion-dollar opportunities with next-generation PCIe and UALink chips, potentially driving billions in content revenue from major cloud clients, its shares have pulled back amid concerns that much of this growth is already priced in.
Bank of America analyst Vivek Arya initiated coverage on Astera Labs with a Neutral rating and a $230 price forecast, based on the company’s position as a key AI connectivity specialist, but flagging valuation concerns and rising competition.
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The analysts noted Astera Labs’ solutions support data transmission in AI data center cables and target a multi-billion-dollar market opportunity through retimer and switching chips based on PCIe and the emerging UALink standard.
However, competition from Nvidia’s (NASDAQ:NVDA) NVLink and Broadcom’s (NASDAQ:AVGO) Scale-Up Ethernet based switches could weigh on growth and limit expansion of its premium valuation multiples.
The bank forecasts Astera Labs to deliver a 37% sales CAGR and 34% EPS CAGR from 2025-2027, with limited competition in PCIe AI scale-up. The firm expects the company to benefit from a $2.5 billion scale-up switch opportunity via its Scorpio-X product, tied to Amazon’s (NASDAQ:AMZN) AWS deployments in 2026-29.
By 2027-28, it is anticipated that the company will begin shipping UALink-based switches tied to AMD GPUs, addressing a $17 billion total addressable market.
Analysts highlighted potential upside from Astera Labs’ deepening content per AWS Trainium 3 chip, where contributions could reach up to $1,000 per accelerator compared with $150-200 in the prior generation. This could translate to $2-3 billion in content revenues from AWS alone in 2027. Sales estimates for 2025-2028 have risen 70–90% since the March 2024 IPO.
Bank of America also cautioned that much of Astera Labs’ growth appears to be priced in at current levels, with shares trading at more than 70 times 2027 earnings. Growth in its retimer products is slowing, and gross margins may decline due to a rising hardware mix, stock-based compensation, and taxes, which will limit EPS leverage.
Analyst forecasts Astera Labs’ EPS to rise from $1.58 in 2025 to $1.99 in 2026 and $2.84 in 2027. Consensus estimates are broadly aligned with BofA’s forecasts. At current levels, Astera Labs trades at a price-to-earnings multiple of 123.1 times 2025 earnings, 97.7 times 2026 earnings, and 68.5 times 2027 earnings, underscoring a still-rich valuation.
On an enterprise value-to-EBITDA basis, the stock is valued at 112.8 times for 2025, falling to 84.2 times in 2026 and 55.1 times in 2027. The free cash flow yield is expected to strengthen gradually, rising from 0.9% in 2025 to 1.2% in 2026 and 1.8% in 2027.
The $230 price objective implies a 79x 2027 P/E, above the peer range of 19x–64x, but considered justified given Astera’s superior 37% sales CAGR versus.
The $230 price forecast is based on a 79-times multiple of Astera Labs’ projected 2027 earnings. This valuation sits well above the peer group range of 19 to 64 times, but analysts see it as warranted by the company’s stronger growth outlook.
Price Action: ALAB shares were trading lower by 5.08% to $198.96 at last check Friday.
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