We recently published a list of 10 Best Semiconductor Stocks With The Highest Upside Potential. In this article, we are going to take a look at where Astera Labs Inc. (NASDAQ:ALAB) stands against other best semiconductor stocks with the highest upside potential.
The semiconductor index (SOX) has been on a tear over the last couple of years. The SOX surged by a whopping 66.95% in 2023, followed by a solid 23.79% in 2024. In comparison, the broader S&P 500 index returned 24.73% and 24.01% in the same period. However, the semiconductor index has fallen by 7.71% year-to-date.
In an interview with CNBC, Glen Kacher, the founder and Chief Investment Officer of Lights Street Capital, underscored his bullishness on chip stocks despite the underperformance in 2025. Kacher remains very bullish on generative AI, which needs the processing power of chips. Kacher said that there is nothing in the tech pipeline as innovative as Gen AI.
Gen AI creates customized answers for the user based on real underlying data. Gen AI has created a massive investment cycle of over $200 billion a year, Kacher said. The ‘Magnificent 7’ companies have been leading capex spenders on Gen AI, and according to Kacher, they will continue to spend big on Gen AI, which is a huge plus for semiconductor companies. The big tech companies are competing intensely over supremacy in Gen AI. Light Street Capital has been shifting a lot of its funds into what Kacher calls the ‘AI 5’.
Semiconductor Valuations are Reasonable Now
According to Kacher, since the summer of 2024, the SOX index has been flat, while the S&P 500 index has returned 15% during the same period. Kacher pointed out that the semiconductor fundamentals have continued to improve in that period. He said, the PE ratio for the SOX index is down by 20% since July 2024, and now stands at 24.5. Meanwhile, the PE ratio for the S&P 500 index is currently 22 and is up 9% in the same period, according to Kacher. Deloitte recently reported that the sales of the semiconductor industry grew 19% in 2024 to $627 billion and expects the sales to go up by over 11% in 2025. According to Deloitte, industry sales could easily surpass the $1 trillion mark by 2030.
According to Kacher investors are irrationally bearish on the semiconductor stocks. He said that the short exposure of hedge funds in the semiconductor stocks is at a five-year high. But given the steadily improving fundamentals and a reasonable valuation, semiconductor stocks could soon be market darlings again as many have a very high upside potential according to analysts.
Our Methodology
We have curated a list of ten semiconductor stocks that have the highest upside potential. For this, we used Finviz screener and set the industry as ‘semiconductor’. We also sorted by market cap and handpicked the stocks with the highest upside potential. Additionally, we have mentioned the hedge fund sentiment for each stock, as of Q4 2024.
Note: All data was recorded on March 19, 2025.
At Insider Monkey we are obsessed with 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. (ALAB) The Best Semiconductor Stock With The Highest Upside Potential?
Astera Labs Inc. (NASDAQ:ALAB) is a global semiconductor company that provides high-performance connectivity solutions for cloud and AI infrastructure. Its products help solve data, network, and memory issues in large-scale cloud and AI systems. Its main offering is the Intelligent Connectivity Platform, which includes high-speed hardware and software called COSMOS to manage and optimize systems. It primarily targets hyperscalers, large cloud service providers like Amazon, Microsoft, and Google, that need efficient infrastructure for handling massive amounts of data.
Astera Labs Inc. (NASDAQ:ALAB) achieved a record revenue of $141 million in Q4 of 2024, a 25% increase from the previous quarter and a whopping 179% year-over-year growth. The company reported $396 million in total revenue for 2024, marking a 242% year-over-year growth. It also reported a non-GAAP gross margin of 76.6% for the year. The company anticipates a breakout year in 2025 with significant growth from all of its four product families. It plans to expand its product portfolio with differentiated hardware and software solutions across multiple protocols. It aims to capitalize on the growing market for high-speed connectivity in AI infrastructure and expects the market opportunity for its products to grow substantially through 2028, potentially reaching a $12 billion market.
Overall, ALAB ranks 2nd on our list of best semiconductor stocks with the highest upside potential. 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.
