Should You Buy Astera Labs Stock Before Aug. 4?
Key Points
Hyperscalers are still pouring money into AI compute, sending Astera's revenue up 93% year over year last quarter.
Higher chip density and new Scorpio X switches should boost revenue per rack and support margins.
A rich valuation, heavy customer concentration, and tougher competition make waiting until after earnings the smarter play.
- 10 stocks we like better than Astera Labs ›
Despite recent volatility, the artificial intelligence (AI) infrastructure market remains red hot. Shares of Astera Labs (NASDAQ: ALAB) have rocketed 70% higher this year. However, the stock has pulled back ahead of the company's second-quarter earnings report on Aug. 4. That dip might look like a buying opportunity, but there are enough risk factors to keep me cautious. Here's why I'm bullish on Astera Labs long-term -- but would wait until after earnings to start a position.
Image source: Getty Images.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Favorable outlook for AI spending
Astera Labs serves as the connectivity backbone for AI servers in data centers. While it doesn't disclose specific customer names, it serves major hyperscalers -- and those companies continue to spend aggressively on AI compute.
Alphabet, for example, just raised its full-year capital expenditure guidance to around $200 billion and plans further spending increases in 2027. This is extremely bullish for the AI infrastructure supply chain, including Astera Labs.
Astera reported first-quarter revenue of $308 million, up 14% quarter over quarter and 93% year over year. Management guided for second-quarter revenue to come in between $355 million and $365 million, representing another significant increase.
AI servers are packing more chips into each rack, increasing the need for high-bandwidth connectivity and creating more opportunities for Astera to sell in each deployment. Management is clearly focused on attaching as much dollar content as possible to every AI accelerator in a rack, which should also help support healthy margins.
Looking ahead, Astera is expected to ramp up its new 320-lane Scorpio X fabric switches in the second half of 2026 as hyperscalers build larger AI chip clusters that demand higher-bandwidth connectivity.
Risks to watch
The stock has already run up this year, and its current 93x forward price-to-earnings multiple already prices in a lot of momentum. That alone makes me cautious, and it adds to other business risks.
Customer concentration stands out. Astera Labs sells to highly profitable hyperscaler businesses, but reliance on a handful of buyers could pressure growth if data center spending stalls. In 2025, one customer accounted for more than 70% of revenue.
Competition is also intensifying. Connectivity and networking are increasingly crowded areas, with much larger semiconductor companies such as Broadcom and Marvell Technology investing in these opportunities. Astera can still win, but it's operating next to giants with deeper resources and broader product portfolios.
That's why I would rather wait until after the results, when we'll know whether guidance supports the current valuation. What could make the stock attractive after earnings -- beyond the headline numbers -- is clear progress in diversifying the customer base and building momentum in selling more products to each customer.
Should you buy stock in Astera Labs right now?
Before you buy stock in Astera Labs, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Astera Labs wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $379,662!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,206,116!*
Now, it’s worth noting Stock Advisor’s total average return is 886% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of July 28, 2026.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Marvell Technology. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.
Recommended Articles
