Without a doubt, Nvidia (NASDAQ: NVDA) has dominated the artificial intelligence (AI) chip market in 2024, boosting its stock to new highs. However, Astera Labs (NASDAQ: ALAB) has emerged as a formidable competitor, outperforming Nvidia in recent months.
Despite optimism surrounding its next-generation Blackwell chips, Nvidia has struggled to maintain its stock price above the $150 mark. The NVDA share price is currently trading at $136.02, reflecting a 23% gain over the past six months but with increased volatility.
In comparison, Astera Labs has outperformed Nvidia, achieving a 64% gain over the same period and trading at $107.31. Year-to-date, Astera Labs is up 73%, trailing Nvidia’s impressive 182% rise.
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While Nvidia has delivered strong returns in 2024, its recent struggles raise questions about whether investors should consider other players in the sector. Analysts have expressed concerns that Nvidia could lose its dominance to lower-ranked AI equities.
Additionally, based on the company’s future forecast, the stock is increasingly challenged to impress investors.
Why invest in ALAB
Astera Labs appears enticing to investors, given its strong fundamentals and likely benefit from the ongoing AI boom. The company’s venture into AI has boosted its financial performance significantly.
For instance, recent momentum was spurred by its stronger-than-expected Q3 2024 earnings report. Thanks to the high demand for AI products, Astera Labs reported quarterly revenue of $113.1 million, up 47% from Q2 2024 and 206% year-over-year.
However, the company recorded a net loss of $7.6 million. For Q4 2024, it anticipates revenue between $126 million and $130 million.
Additionally, Astera Labs’ close ties with major players in the AI industry make it a compelling choice for investors looking to diversify away from Nvidia. The firm, which went public in March, has Nvidia and Advanced Micro Devices (NASDAQ: AMD) among its key customers. These partnerships can potentially boost investor confidence and drive future stock gains.
Since its March IPO, Astera Labs (ALAB) has also demonstrated impressive strength compared to peers in the semiconductor sector. The stock has gained over 50% since its IPO, outperforming the VanEck Semiconductor ETF, which is down nearly 8% in the same period.
Wall Street take on ALAB
At the same time, Wall Street analysts are bullish on ALAB stock. According to MarketBeat Ratings, 12 experts gave the equity a consensus ‘Buy’ rating. The average 12-month price target set by analysts is $94.67.
For example, Craig Hallum raised its price target from $75 to $105 while maintaining a ‘Buy’ rating. Morgan Stanley increased its price target from $74 to $94 and assigned an ‘Overweight’ rating. Meanwhile, Evercore ISI adjusted its target from $98 to $80 but maintained an ‘Outperform’ rating.
In conclusion, while Nvidia remains a leader, Astera Labs offers strong growth and diversification opportunities driven by strong fundamentals, such as key partnerships with leading AI players.
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