Shares of data center connectivity solutions provider Astera Labs (ALAB 1.24%) tumbled this week following news of a partnership between Advanced Micro Devices and Oracle. That deal, which will put 50,000 AMD GPUs into Oracle data centers starting in the second half of 2026, seems to have rekindled some worries that Astera Labs' PCIe-based solutions could face increased competition.
Shares of Astera Labs were down about 20.4% for the week as of early Thursday afternoon, according to data provided by S&P Global Market Intelligence.
Image source: Getty Images.
AI deals are sparking concern
While the AMD-Oracle deal isn't a negative for Astera Labs, given that the company is deeply involved with the UALink networking standard that will be used, this deal comes on the heels of another AI-related deal that is likely to be problematic for the company. In September, Nvidia teamed with Intel in an unprecedented partnership that will integrate Nvidia's proprietary NVLink networking technology with Intel's x86 data center CPUs.
Nvidia already dominates the market for artificial intelligence (AI) accelerators, and by bringing its networking tech to Intel's data center CPUs, NVLink could become even more prevalent. While there may be plenty of room for multiple networking standards to coexist, investors appeared to view the AI dealmaking this week as a reason for concern.
Valuation is another issue
Beyond the news, Astera Labs' valuation could have also contributed to the steep decline this week. While revenue is growing rapidly, a market capitalization of nearly $27 billion puts the forward price-to-sales ratio at a frothy 35.
If Astera Labs keeps growing at a breakneck pace, the fundamentals can catch up with that valuation. But any sign that growth is slowing, or additional industry developments like the Nvidia-Intel deal that appear to threaten the company's prospects, could send the stock tumbling back to Earth.
Astera Labs will report its third-quarter results after the market closes on Nov. 4, so investors won't need to wait too long for an update on the company's performance.
