Astera Labs recently presented at the JP Morgan Global Technology Conference on May 19. I will review some encouraging details about the business from the conference.
Stepping back for a moment, Astera Labs reported Q4 2025 earnings in February which seemed decent but the market sold them off heavily. The stock got down to $100 a share in late March from a previous high of $260 back in September 2025. Additionally, the stock seemed to be classified as copper based, while optics based stocks were pushing new highs.
When the market gives that strong of feedback that I may be wrong about a stock, it is worth questioning if I missed something. The team at Astera had talked about their COSMOS software platform as being the “mothership” or the “central nervous system” of the data center. After their February report I was wondering if maybe the company had oversold what they were capable of.
Since reviewing this JP Morgan conference and the more recent earnings report in early May, I am as optimistic as ever for the prospects of Astera Labs. Their Scorpio switch is designed into Amazon’s Tranium 4 system, as well as AMD’s MI500 which is their next generation of AI accelerator. Both of these AWS and AMD programs are expected for further significant ramps into 2027.
The Scorpio switch sits at the heart and center of these advanced designs, routing network traffic through the system. It is a one of a kind solution which is why the company spoke at this conference by describing Scorpio X as a “completely greenfield opportunity” with a 10B TAM. Additionally, Scorpio is being enabled for optical communication, allowing both copper and optical signals to work in tandem. Astera’s COSMOS software gives advanced diagnostics and telemetry and gives both AWS and AMD a realistic opportunity to compete with NVIDIA systems.
Some of the additional details from this JP Morgan conference include,
- Anticipates broad based growth across all products
- Scorpio family expected to be largest product in sales by year end
- Taurus is expanding from one customer at 400 gig to many customers at 800 gig
- Finding new opportunities for Leo product, new use cases of KV cache
- NVLink Fusion opportunities, where they see more opportunity to participate in the NVLink ecosystem
- Adding in optics for Near Packaged Optics and Co-Packaged Optics increases content per system significantly beyond $1,000
- Analyst asks about custom XPU silicon with Amazon Tranium 4 and AMD’s MI500, suggests their models show 2028 is 50% ASIC chips vs 50% merchant off the shelf GPUs
- Analyst added the move to custom ASICs is a net positive for the Astera team
- Answer that ASICs not as performant as leading NVIDIA systems, requires more machines to accomplish same task (good for Astera)
- Takes pride in “calling ourselves kind of the Switzerland of connectivity”
- Systems that are already using PCI Express or similar protocols adds a “multiplicative opportunity for us to participate”
- Analyst talks about Astera designing their own chips now, “custom chip programs”, describes it as a multi-billion opportunity for custom chip solutions
- Answer, “This custom business is very exciting for us”, added “this got started because of the trust we developed with our customers”
- Doing the full front end design, back-end design, and take it all the way through manufacturing, “allows us to capture more value than you would be able to capture in just a kind of pure-play ASIC model”
- NVLink Fusion large ramp expected to happen in 2027 alongside the ASIC ramp
- Custom Leo product, “our chips are software-heavy”, “architect our chips to use as much software as possible”, “custom version that was more suitable for this application”
- Analyst on Scorpio X, “now ramping initial production shipments with high volume in the second half with your lead customer for their flagship custom XPU solution” (most likely Tranium 4)
- Answer, “We’re very excited about the Scorpio X product family”, “greenfield TAM opportunity for us”, “We have been shipping more radix solutions”
- Scorpio X spread across hyperscalers plus AI platform providers, leads to revenue opportunities in 2027 time frame
- CEO details how AWS and AMD rely on UALink standard, both GPU and ASICs ramping in 2027
- New high radix 320-lane Scorpio “simplifies large scale topologies”, “improved performance with single hop latency”
- Integrating networking compute and Hypercast technology, Switch now does the work of sending the message to other GPU
- Hypercast and in-network compute both exposed via COSMOS software, “COSMOS software also becomes much better and much more embedded into our customer software”
- Optical glass coupler they acquired through aiXscale has very good ratings for scale-up and scale-out, customers now asking for and getting individual component sales
Lastly one detail which stands out about Astera is their high gross margins at 76%. This is higher than almost any up and coming semiconductor, which indicates their innovation and lack of commoditization. Because they are building custom silicon solutions with advanced designs, they can change a premium for these solutions. This in turn is building a highly profitable business as they scale up into 2027.