Technology

Prediction: This Semiconductor Stock Will Be the Best Performer the Rest of 2024

Trey Thoelcke

Published: August 14, 2024 9:15 am

24/7 Wall St. Insights

• Nervous investors may be wondering if semiconductor stocks are still a good bet for the rest of this year.
• Wall Street has not lost faith. Expectations are especially high for Astera Labs Inc. (NASDAQ: ALAB).
• Also: Discover the next Nvidia.

The poster child for artificial intelligence stocks has to be semiconductor maker Nvidia Corp. (NASDAQ: NVDA), which is up more than 460% in the past two years. Analysts expect semiconductor stocks overall to outperform with double-digit percentage growth. But the recent market pullback took some of the wind out of the sails of Nvidia and the rest of the Magnificent 7 stocks. Nervous investors now may be wondering if chip stocks are still a good bet for the rest of this year and into the next.

Wall Street does not seem to have lost faith. Here are some semiconductor stocks for which analysts have big expectations. While giants like Nvidia and Intel Corp. (NASDAQ: INTC) are not on this list, there are plenty worth a look.

So, as far as Wall Street is concerned, Astera Labs is the semiconductor stock with the greatest potential upside in the coming year. Does that mean that its shares are undervalued? Or perhaps has one overzealous analyst skewed the mean?

Why Invest in Astera Labs?

Despite jumping more than 35% after its initial public offering earlier this year, Astera Labs stock is down more than 42% since the IPO. The company’s CEO said that it wants to be “the next big leader in AI and computing” and that going public was meant to help it accelerate development and grow its staff. The company has relationships with Nvidia, Advanced Micro Devices, and Intel. Astera Labs was featured in the Forbes Next Billion-Dollar Startups list in 2022, and last year it won the Data Breakthrough Award for Semiconductor Product of the Year. Shares hit a post-IPO low this past week, yet analysts appear to expect a big bounce back this year and into the next.

Astera Labs, the Company

Astera Labs, the Stock

The share price sank to a post-IPO low of $36.22 last week, on the heels of an overall market pullback. While the stock was sinking since its IPO date, the Nasdaq and the S&P 500 saw marginal gains. Note that the $69.50 consensus price target is well above the current price but still lower than the $95 post-IPO high. The consensus recommendation on Wall Street is to buy shares. Barclays, Deutsche Bank, and J.P. Morgan have recently reiterated Buy-equivalent ratings.

Institutional investors hold around 42% of the shares. FMR is a beneficial (over 10%) owner. Intel also has a notable stake. Almost 105 million shares, or more than 8% of the float, are held short. Three directors together bought more than $1 million worth of shares at the IPO, and an executive sold about 265 shares in May.

Wall Street expectations for where the stock goes in the next 52 weeks vary but are all positive. The high price target suggests shares will more than double in the coming year, and the consensus and low targets also signal plenty of room to run.

While Wall Street appears optimistic, the stock isn’t without risks. The AI bubble could burst and demand for Astera Labs products dry up. The company could lose important customers or partners as competition increases, or simply watch its market share wither. Risks could range from products with design flaws to cyberattacks to political or intellectual property issues. Analysts don’t seem to be overly concerned, however, in the short term.

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