Astera Labs' stock climbs as the company strives to make AI chips more powerful

By Britney Nguyen

The connectivity company also issues upbeat earnings results

Astera Labs stock was up in after-hours trading on Tuesday.

Astera Labs has been one of the hottest chip stocks in recent weeks. Now it's on track to build on that momentum.

Shares of Astera Labs (ALAB) rose 4% in Tuesday's after-hours trading following an earnings beat and a new product announcement that aims to capitalize on larger, more powerful chip systems.

The company, which makes connectivity products for the semiconductor sector, reported revenue of $308 million for the first quarter, up 93% from a year ago and above the $292 million FactSet consensus. Astera Labs' adjusted earnings of 61 cents nearly doubled as well and was ahead of the 54-cent consensus view.

"We believe the opportunity ahead is significant, and we are investing to be a leader for rack-scale AI technologies in close partnership with our customers," CEO Jitendra Mohan said in a statement.

See more: Optics is the next big AI bottleneck. This company could be an underrated beneficiary.

Astera Labs is guiding for revenue to come in between $355 million and $365 million for the June quarter, well ahead of the $310 million that analysts tracked by FactSet were modeling. The company's outlook for adjusted earnings per share is between 68 cents and 70 cents, well above the consensus of 55 cents.

The company also announced its Scorpio X-Series 320 Lane Smart Fabric Switch on Tuesday - a chip that was developed to improve utilization and performance of large AI chip clusters.

The new chip "really goes to the heart of scale-up connectivity," which is crucial for both artificial-intelligence training and inference, or the process of running AI models, Mohan told MarketWatch. Scale-up networking allows multiple chips to work together as one, more powerful system. The accompanying Cosmos software allows customers to run diagnostics and telemetry to check on their systems, Mohan added.

Astera Labs said its new chip is the largest open-standard, memory-semantic fabric switch in the industry, referring to the load/store approach of multiple AI chips working together, similar to one large brain.

"If you want to get information from this part of the brain, you simply go access that location and get that information," Mohan explained.

That allows for lower latency and higher throughput, Mohan said. That the fabric switch is based on open standards also enables customers to use different types of AI chips, he added. Looking forward, Mohan said the company is also focused on delivering optical-focused solutions as interest grows in near-packaged optics and co-packaged optics.

Astera Labs' stock is up about 20% so far this year, and ranks third among gainers in the broader PHLX Semiconductor Sector SOX over the past 25 sessions, according to Dow Jones Market Data.

-Britney Nguyen

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05-05-26 2032ET