Astera Labs, Inc. (ALAB): A Bull Case Theory

We came across a bullish thesis on Astera Labs, Inc. on Nikhs’s Substack. In this article, we will summarize the bulls’ thesis on ALAB. Astera Labs, Inc.'s share was trading at $206.21 as of October 10th. ALAB’s trailing and forward P/E were 262.00 and 107.53 respectively according to Yahoo Finance.

Astera Labs delivered Q2-FY25 revenue of $192 million, up 150% year-over-year, with a 76% gross margin and operating margins above 39%, signaling execution that continues to outpace expectations. The results reinforced that this is no longer a pure hardware growth story but evidence of a strategic transformation toward a full-stack AI connectivity platform.

Management’s repeated emphasis on “platform” underscores a deliberate shift from component sales to a unified hardware-software model anchored by the COSMOS telemetry suite and Scorpio-X fabric. Scorpio already accounts for over 10% of revenue in its first volume quarter, demonstrating that hyperscalers are designing systems around Astera’s architecture—a hallmark of platform adoption rather than incremental product success.

The company’s neutrality between NVIDIA’s proprietary NVLink Fusion and the open UALink consortium positions it as the indispensable connectivity layer that hyperscalers trust to avoid vendor lock-in, a strategy that could redefine its long-term valuation. Three potential paths emerge: a base case of premium hardware execution, a bullish platform scenario where COSMOS monetization lifts margins toward 80% and revenue to $1.4 billion by 2028, and a lower-probability competitive displacement case if bundling strategies succeed.

Current execution trends, customer dependence, and 300+ design wins point decisively toward the platform scenario. With software monetization targeted for FY26, UALink deployments expected in 2026, and the Scorpio ramp accelerating, Astera’s evolution into the AI infrastructure operating layer appears underway. The market still prices it like a premium hardware vendor, but results suggest a platform company deserving of higher multiples and a fundamentally different valuation framework.

Previously we covered a bullish thesis on Astera Labs, Inc. (ALAB) by Oliver | MMMT Wealth in April 2025, highlighting its role as a critical AI and cloud infrastructure enabler despite near-term trade and concentration headwinds. The stock has appreciated approximately 273% since coverage as the thesis played out. Nikhs shares a similar view but emphasizes Astera’s shift from hardware to a full-stack AI connectivity platform with software-driven growth.

Astera Labs, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held ALAB at the end of the second quarter which was 45 in the previous quarter. While we acknowledge the potential of ALAB as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.