Shares of Astera Labs (ALAB.US) closed 9.2% higher at $191.97 on Tuesday, buoyed by news that its major customer Amazon (AMZN.US) signed a $100 billion agreement with Anthropic. UBS initiated coverage on the AI networking supplier with a "Neutral" rating and a $180 price target. The UBS analyst team, led by Natalia Winkler, stated in an investor report: "Since launching its retimer products in 2019, Astera Labs has successfully maintained its market share with Amazon and taken steps to expand its product applications in other hyperscale data centers, demonstrating strong product quality and execution. Based on our bottom-up retimer sales forecasts and discussions with experts, we are optimistic about Astera Labs' growth prospects over the next 2-3 years and expect its 2027 revenue to exceed market expectations by 4%, driven primarily by retimers and its scalable PCIe/UA Link switching portfolio." However, Astera Labs' entry into the increasingly competitive switch market, along with its high valuation, led UBS to assign a "Neutral" rating. Winkler noted: "The next phase—entering the PCIe switch market starting in the second quarter of 2025—brings significantly higher competitive risks. While the PCIe switch market is approximately four times larger than the retimer market, it includes established players like Broadcom (AVGO.US) and Microchip Technology (MCHP.US), which hold over 50% market share, as well as new entrants such as Marvell Technology (MRVL.US). We project Astera Labs will capture around 25% market share by the end of the decade, up from less than 5% currently, but this will require consistent and effective competition management."
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