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Investing.com - Amazon has introduced its next-generation custom accelerator, Trainium4, which incorporates both NVLink Fusion and UALink technologies, marking a shift from the PCIe-based network using Astera Labs’ (NASDAQ:ALAB) Scorpio switch in Trainium3. Astera Labs , which has seen remarkable revenue growth of 136.5% over the last twelve months, has been a standout performer in the semiconductor connectivity space.
NVLink Fusion extends connectivity support to hybrid architectures involving custom ASICs/CPUs and NVIDIA chips, allowing customers to use NVLink for scale-up with non-NVIDIA accelerators. This technology will be used in hybrid rack configurations that include both NVIDIA GPUs and Amazon’s Trainium4.
Astera Labs has established a partnership with NVIDIA to develop custom NVLink connectivity solutions and has previously disclosed its participation as an NVLink Fusion partner. For "native racks" that exclusively use Trainium4, UALink will be employed, where Astera Labs will continue to have scale-up switch opportunities.
Morgan Stanley maintains an Overweight rating and $210 price target on Astera Labs stock, viewing the Amazon announcement as expanding Astera’s addressable market rather than threatening it. The firm believes Astera still has significant content opportunity with NVLink Fusion. According to InvestingPro data, analysts have set targets ranging from $140 to $275, with consensus suggesting significant upside potential. InvestingPro also highlights that 14 analysts have recently revised their earnings expectations upward for the upcoming period.
Astera Labs shares fell 13% on Tuesday as investors interpreted the NVLink adoption as unfavorable, but Morgan Stanley considers the announcement "clearly an incremental positive" and remains convinced of a "large and durable growth opportunity" for the company. Currently trading at $142.94, the stock has delivered a 50.3% return over the past six months despite recent volatility. InvestingPro analysis indicates the company is currently overvalued based on its proprietary Fair Value model, though analysts expect net income growth this year. For deeper insights into Astera Labs’ valuation metrics and growth prospects, check out the comprehensive Pro Research Report available for this and 1,400+ other US equities on InvestingPro.
In other recent news, Astera Labs announced its plans to develop custom connectivity solutions as part of its entry into the NVIDIA NVLink Fusion Ecosystem. This initiative is aimed at supporting the increasing complexity of AI systems that integrate multiple computing resources. Additionally, Astera Labs’ Leo CXL Smart Memory Controllers are playing a crucial role in Microsoft’s Azure M-series virtual machines preview, marking the industry’s first deployment of Compute Express Link (CXL) memory expansion technology. This collaboration seeks to address the demands of memory-intensive workloads by overcoming traditional server architecture limitations.
On the analyst front, Raymond James has assumed coverage of Astera Labs with a Market Perform rating. The firm highlighted Astera’s leading position in high-speed connectivity solutions but noted potential long-term structural challenges. Meanwhile, BNP Paribas Exane initiated coverage with an Outperform rating, setting a price target of $225, indicating significant upside potential. Despite recent declines in stock value, this rating suggests optimism regarding market acceptance of Astera’s technologies. These developments reflect Astera Labs’ ongoing efforts to innovate in the semiconductor connectivity space.
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