We recently published a list of the 12 Best IPO Stocks to Buy in 2025. In this article, we are going to take a look at where Astera Labs, Inc. (NASDAQ:ALAB) stands against other best IPO stocks to buy in 2025.
On February 25, Hamilton Lane co-CEO Erik Hirsch joined ‘Closing Bell Overtime’ on CNBC to discuss the developments that currently hinder the IPO pipeline. Erik Hirsch noted that there are two competing factors at play. On one side, there is general market uncertainty, which is currently the dominant issue. While on the other side, there are positive factors: many high-quality businesses in private markets are ready for an exit. They are mature, cash flow positive, and growing. The IPO market is the logical conclusion for them, and the public markets need more new names to reduce concentration in a few technology businesses. For the public markets to be healthy, they need fresh blood.
Hirsch believes the IPO market can have a good year without relying solely on software. There is room for more software companies, but there is also interest in traditional non-tech businesses to balance market weightings. He identified sectors that could see growth, such as manufacturing, which could benefit from reshoring and reinvestment in the US. The food supply chain and healthcare are also expected to benefit from administrative changes. Regarding President Trump’s positioning on tariffs, Hirsch thinks it is more about negotiating tactics than actual tariffs. If negotiations cease and tariffs become the focus, there will likely be a market reaction. The uncertainty extends to government job cuts, with questions about the scale of reductions and where displaced workers will go. Despite some positive signs for certain sectors and businesses ready for IPOs, market uncertainty, and regulatory changes are holding back the IPO market and dealmaking. The environment of unpredictability makes it challenging for companies to pursue IPOs or M&A deals at present.
Still, the IPO market holds promise due to a strong backlog of mature and high-quality private businesses eager for public exits.
Our Methodology
We used the Finviz stock screener to compile a list of the top companies that went public in the last 2 years. We then selected 12 stocks with high analysts’ upside potential that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Astera Labs Inc. (NASDAQ:ALAB) the Best IPO Stock to Buy in 2025?
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Astera Labs, Inc. (NASDAQ:ALAB) designs and sells semiconductor-based connectivity solutions that are essential for cloud and AI infrastructure. It offers intelligent connectivity platforms that feature smart DSP retimers, cable modules, and software suites like COSMOS. It enables efficient management of large-scale cloud deployments.
On March 14, Raymond James began covering the company and assigned it an Outperform rating with an $82 price target. This emphasized the company’s market position in high-speed connectivity, which is growing due to the increasing demand from GenAI. James observed that the rising computational demands are fueling the need for advanced interconnects. The firm also highlighted the company’s leadership in the $2 billion PCIe retimer market and its presence in the Active Electrical Cable segment.
In Q4 2024, Astera Labs, Inc. (NASDAQ:ALAB) achieved a record revenue of $141 million, which was a 179% increase year-over-year. This was attributed to the performance of its Aries PCIe Retimer and Taurus Ethernet Smart Cable Module product families, which are crucial for AI scale-up and scale-out connectivity. Full-year 2024 revenue was up 242%. The company is expanding R&D and making acquisitions to enhance AI-driven connectivity solutions. It anticipates a $12 billion market opportunity by 2028 due to the growth potential in the high-speed connectivity sector.
The company is a leader in connectivity solutions for high-performance computing. Alger Small Cap Growth Fund stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q4 2024 investor letter:
“Astera Labs, Inc. (NASDAQ:ALAB) is a semiconductor company specializing in connectivity solutions for data-centric systems, including cloud computing, artificial intelligence, and machine learning. Its products optimize data flow and performance in servers, GPUs, and AI accelerators, addressing bottlenecks in high-performance computing environments. The company’s Intelligent Connectivity Platform (ICP) integrates advanced semiconductor hardware with the proprietary COSMOS software suite, delivering customizable and cost-effective solutions. Astera’s Platform-Specific Standard Products (PSSP) enhance flexibility with features such as predictive analytics, monitoring, and troubleshooting. Backed by strong relationships with leading cloud and AI providers, we believe Astera is well positioned in rapidly growing markets, demonstrating high profitability and industry-leading gross margins. During the quarter, shares contributed to performance after reporting better-than-expected fiscal third-quarter results, with revenues and gross margins exceeding analyst estimates. Specifically, revenue growth spanned all four product segments, led by accelerated custom silicon sales and robust GPU demand. Management also raised fiscal fourth-quarter guidance, citing expanding product ramps and a broader customer base.”
Overall, ALAB ranks 4th on our list of the best IPO stocks to buy in 2025. While we acknowledge the growth potential of ALAB, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ALAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
