Citi names beneficiary of AMD and OpenAI deal, whose shares could rise 30%

Citi expects Astera Labs shares to grow by almost 30%. The developer of hardware and software solutions for AI and cloud infrastructure will be one of the beneficiaries of the AMD and OpenAI deal, the bank's analysts explain. Wall Street is not so optimistic yet: analysts' consensus price target is 9% lower than the current one. The securities are already up 60% since the beginning of the year.

Citi analyst Atif Malik reiterated a record high Wall Street target price of $275 on Astera shares, CNBC reports. Malik set this target on September 17. It is now 29.7% above Tuesday's closing price. The Citi analyst also reiterated his recommendation to buy the stock. Shares of the developer of hardware and software solutions for AI and cloud infrastructure may rise sharply after the deal between chipmaker Advanced Micro Devices and the developer of chatbot ChatGPT OpenAI, Malik said.

Astera shares fell 3.9% to $212.1 in trading on Oct. 7. On Monday, news of a multibillion-dollar contract between AMD and OpenAI saw the securities appreciate by 10%.

Astera Labs develops high-speed semiconductor communication systems for cloud solutions and data centers supporting artificial intelligence. As part of the AMD and OpenAI deal, it will supply key network infrastructure for the AMD Helios platform, which is scheduled to launch in 2026, the investment bank explains.

By partnering with AMD, Astera will also be able to benefit from the OpenAI agreement, which involves deploying AMD Instinct gas pedals over several years with up to 6 gigawatts of total power, Malik wrote in a memo cited by CNBC.

"We are positive on this news for Astera Labs as the company is a leader in open AI networking ecosystems, including UALink, which AMD will be able to utilize in its Helios platform coming out in 2026," states the Citi analyst.

UALink technology is an open industry standard for connecting AI chips and switches within AI modules. Its goal is to enable more efficient and scalable training and application of AI models. The standard was developed by the UALink Consortium, which includes AMD, Intel, Broadcom, Cisco, Google, HPE and others.

Malik also believes Astera would benefit from a wider adoption of open rack solutions, which would allow the company to earn up to $1,000 per gas pedal.

Evercore ISI raised its target price on Astera Labs shares from $104 to $215 in August, maintaining an "above market" recommendation. The investment bank called the semiconductor company a "net AI asset amid accelerating capital expenditure growth" in the industry. The target increase followed the company's successful second-quarter reporting. Its revenue rose 150% year-on-year to $191.9 million.

In total, according to MarketWatch, of the 21 analysts tracking Astera securities, 16 of them recommend buying, four recommend holding, and one advises selling. The Wall Street consensus price target is $192.3, which is 9.3% below the stock's current price.

This article was AI-translated and verified by a human editor