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

We came across a bullish thesis on Astera Labs, Inc. (ALAB) on Deep Value Returns’s Substack. In this article, we will summarize the bulls’ thesis on ALAB. Astera Labs, Inc. (ALAB)'s share was trading at $99.53 as of 18^th June. ALAB’s trailing and forward P/E were 75.98 and 75.76 respectively according to Yahoo Finance.

Astera Labs (ALAB) has been reintroduced as a buy recommendation by Deep Value Returns, grounded in its strong financial positioning and promising growth trajectory. The author advocates for a disciplined allocation strategy: initiating a 2.5% position now, with an additional 2.5% in 4–6 weeks to potentially lower the average cost, while capping total exposure at 5% of the portfolio.

Astera Labs operates debt-free and holds substantial cash on its balance sheet—key attributes for an “Inflection” investor seeking businesses transitioning into stronger free cash flow generation. The core thesis hinges on ALAB’s potential to reach $1 billion in revenue by 2026, which would position it as an institutional must-own and justify a significant valuation premium.

Despite currently trading at 160x next year’s free cash flow, the author sees this as a bargain in light of ALAB’s growth prospects and forecasts a price target of $140 by the end of 2026. The investment comes with portfolio-level considerations: the author is already exposed to the same sector through holdings in Credo Technology and Nebius, and aims to manage that risk by eventually exiting Nebius if its price appreciates.

With 20% of the portfolio currently in cash, the recommendation to buy ALAB is framed not as a hasty move but as a high-conviction deployment of capital under strict valuation standards. In essence, this investment is seen as a strategic, risk-adjusted bet on a high-growth, cash-rich semiconductor enabler that aligns with both the author's cash deployment goals and sector outlook.

Previously we covered a bullish thesis on Astera Labs, Inc. (ALAB) by Oliver | MMMT Wealth in April 2024, which highlighted the company’s role as a critical enabler in AI and cloud infrastructure, supported by strong free cash flow growth and long-term customer demand. The company’s stock price has appreciated by approximately 80% since our coverage. This is because the thesis played out as investor sentiment rebounded and AI capex momentum accelerated. The thesis still stands as ALAB remains well-positioned in the AI supply chain. Deep Value Returns shares a similar view but emphasizes a valuation-disciplined, portfolio-allocation framework and a $1B revenue milestone as the key inflection trigger.

Astera Labs, Inc. (ALAB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held ALAB at the end of the first quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of ALAB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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