Bull of the Day: Astera Labs (ALAB)

Astera Labs: Selling the Picks & Shovels to the AI Gold Rush

If Wall Street teaches investors anything, it’s that history can be a powerful lesson about the past and an omen for the future if properly understood. During the California Gold Rush of the mid-19^th century, many prospectors moved to California to strike riches. Unfortunately, the vast majority of these prospectors went broke. Conversely, savvy merchants who instead sold the picks and shovels profited the most from the mayhem.

“Picks and shovels” are a perfect metaphor for what is happening today in artificial intelligence, the modern-day gold rush. Companies like Meta Platforms (META), Microsoft (MSFT), and Alphabet (GOOGL) are spending $100s of billions of dollars to vie for AI supremacy. Though it is tough for investors to predict who will ultimately win the AI race, AI infrastructure providers like Zacks Rank #1 (Strong Buy) stock Astera Labs (ALAB) provide the most sure-fire investments as they provide the picks and shovels needed to train large language models (LLMs).

What Does Astera Labs Do?

Astera Labs manufactures high-powered semiconductors and software designed for use in data centers and artificial intelligence applications. Today, AI data centers are filled with large clusters of Nvidia (NVDA) GPUs that must transmit gargantuan amounts of data quickly and reliably. However, the massive quantity of data transmission can lead to bottlenecks. Astera Labs creates specialized solutions to help alleviate these bottlenecks, allowing AI data centers to run seamlessly.

ALAB Boasts Strong Partnerships with AI Leaders

Although a plethora of companies seek to capitalize on the AI revolution, only a select few are responsible for the foundational data infrastructure. These companies include Nvidia, Intel (INTC), and Advanced Micro Devices (AMD). Before going public in March, ALAB disclosed that the company has “trusted relationships” with these industry juggernauts.

ALAB: Explosive Top & Bottom-Line Growth

As the AI buildout snowballs and becomes more competitive, Wall Street analysts expect Astera Labs to benefit. Zacks Consensus Analyst Estimates predict that ALAB will grow top-and-bottom line growth at a double-digit pace through 2026.

ALAB Technical Analysis

ALAB shares have more than doubled in value since July, amid the AI hype. Last week, ALAB retreated to its 50-day moving average for the first time since the meteoric move. The first tag of the 50-day moving average in a leading stock typically offers investors a favorable buy point.  

Bottom Line

Astera Labs’ position as a key provider of essential “picks and shovels” for AI infrastructure makes it a compelling investment. Though the mainstream AI race remains uncertain, companies providing the foundational tools are poised to benefit from the massive, ongoing investment by tech giants.

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

Zacks Investment Research