Astera Labs (ALAB) reported a strong Q4 and issued encouraging guidance on Wednesday. Shares still crashed over 20% as the company confirmed it has issued new warrants for Amazon (AMZN).
The selloff on Feb. 11, saw ALAB slip below its key moving averages (50-day, 100-day, 200-day), indicating downward pressure could sustain now that bears are firmly in control.
Versus its 52-week high, Astera Labs stock is now down more than 40%.
Investors bailed on ALAB stock today primarily on dilution concerns after the semiconductor firm issued new warrants for Amazon to buy about $466 million worth of its shares.
However, the disclosed agreement represents a significant revenue opportunity as well, given it’s contingent on product purchases reaching $6.5 billion.
Meanwhile, Jitendra Mohan, chief executive of Astera Labs, said “artificial intelligence (AI) is still in its early innings,” in a post-earnings CNBC interview.
In fact, AI tailwinds helped management guide for up to $297 million in revenue for the current quarter — miles ahead of the $259 million consensus — offering long-term investors to buy this dip in Astera Labs.
Astera Labs shares are attractive also because the company holds an increasingly valuable position within the AI infrastructure ecosystem.
It’s become a critical bottleneck in bringing data center capacity online, as hyperscalers competing intensely for AI infrastructure dominance must secure reliable connectivity solutions.
With the Magnificent 7 expected to spend over $650 million on artificial intelligence infrastructure this year, it’s reasonable to assume that demand for “pick-and-shovel providers” like ALAB will remain strong in 2026.
While the AI stock looks expensive at a price-to-sales (P/S) multiple of about 44x, the premium is justified given its remarkable 92% revenue growth in Q4 and an adjusted gross margin of nearly 76%.
What’s also worth mentioning is that Wall Street analysts recommend buying ALAB shares on the post-earnings decline as well.
