Astera Labs announces first AI-centric PCIe Gen 6 switch, shares surge

Investing.com -- Astera Labs Inc (NASDAQ:ALAB) announced on Tuesday the Scorpio PCIe Gen 6 Switch (NYSE:SWCH), a product that has been hinted at over the past few months.

The company’s shares surged over 12% in premarket trading Wednesday.

Even though the company is in a quiet period and plans to provide more details during its November earnings call, the new switch is expected to significantly boost content per GPU, adding hundreds of dollars per unit, according to Morgan Stanley (NYSE:MS)

"While the exact content details are unknown, this new product is incrementally positive to our financial forecast, and for a company doing ~$500mn in revenues this new product should be meaningful to CY25 revenue and earnings,” the firm’s analysts said in a note.

The Scorpio switch is currently in pre-production, with more information on its timing expected in November. It is also the first Gen 6 product available on the market, where the previous generation was largely dominated by Broadcom (NASDAQ:AVGO).

The analysts noted that Astera has historically been able to stay at the forefront of technological advancements, which has helped it gain market share. However, the switch market remains competitive, especially with Broadcom's strong presence. Although Astera is the first to announce, Morgan Stanley expects competitors to follow with similar announcements soon.

Nonetheless, given that the AI technology is leading to frequent upgrades to the PCI Express standard, this “should open up new opportunities for Astera,” analysts said.

“It took 25 years to move from PCI gen 1 to gen 5, but we now appear to be on a much quicker cadence,” they noted.

"We believe this is a reason to buy the stock, and listed new products as a key catalyst in our recent upgrade."

The ongoing concerns around Blackwell content have pressured the stock, but this announcement should help alleviate those concerns, especially with the GB200 PCI Gen 6 connections from CPU to NIC (NASDAQ:EGOV).