Astera Labs (ALAB): Valuation in Focus After First CXL Memory Deployment with Microsoft Azure

Astera Labs (ALAB) shares drew attention after the company revealed its Leo CXL Smart Memory Controllers now enable customers to test memory expansion on Microsoft’s Azure M-series virtual machines. This marks the first industry deployment of CXL-attached memory.

See our latest analysis for Astera Labs.

Astera Labs’ momentum has cooled after a strong stretch earlier in the year as the market weighs its growth narrative. Despite recent announcements with Microsoft and robust demand signals around AI-optimized products, the 1-year total shareholder return stands at an impressive 33.8%, even as the share price has pulled back nearly 12% over the past month. This pattern suggests investors are taking a breather following rapid gains. At the same time, the company’s positioning in cloud infrastructure and data center expansion keeps long-term prospects firmly in focus.

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With shares pulling back but strong demand signals in AI and cloud infrastructure, is Astera Labs undervalued by the market or is all of that future growth already reflected in the current price? Could this be a buying opportunity, or is caution warranted?

Most Popular Narrative: 29% Undervalued

Astera Labs’ most widely followed narrative places its fair value at $196.83, well above the last closing price of $139.29. The narrative’s bullish foundation draws on accelerating revenue, increasing margins, and momentum with key hyperscale customers.

Strong early engagement with hyperscalers and AI platform providers on open, interoperable standards like UALink (which are still in the early adoption phase with projected ramp in 2027 and beyond) enables Astera Labs to capture the industry's shift toward open, multi-vendor AI Infrastructure 2.0. This ensures exposure to significant long-term market expansion and incrementally larger addressable markets, positively impacting revenue growth rates and future margin potential as adoption accelerates.

Read the complete narrative.

Want to uncover what’s fueling this impressive valuation gap? The most popular narrative includes projections of rising earnings, margin expansion, and a future profit multiple that leaps beyond current industry norms. Which growth assumptions push Astera Labs’ fair value so much higher than the current share price? Dig deeper to discover the bold forecasts at the center of this outlook.

Result: Fair Value of $196.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the optimism around Astera Labs could be tempered if hyperscaler spending slows or if competitive pressures accelerate in the fast-evolving connectivity market.

Find out about the key risks to this Astera Labs narrative.

Another View: Earnings Multiple Raises Caution

While the most popular narrative suggests Astera Labs is undervalued, the market signals something different. Based on its price-to-earnings ratio of 118.3x, Astera Labs appears much more expensive than both its US semiconductor peers (32.8x) and the fair ratio of 45.6x. This wide gap suggests investors are paying a premium based on lofty future growth hopes. Will the fundamentals catch up, or does this premium carry extra risk?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Astera Labs Narrative

If you want to challenge these perspectives or conduct your own investigation, crafting your personalized thesis is simple and takes just a few minutes. Do it your way.

A great starting point for your Astera Labs research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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