Nvidia Barely Moved. These 2 AI Connectivity Stocks Jumped More Than 7%

On September 4, Nvidia's stock only gained 0.8%, while Astera Labs surged 9.8% and Marvell Technology climbed 7.1%. This contrast highlighted investors expanding their AI investments beyond accelerators to connectivity providers. Astera Labs' (NASDAQ:ALAB) surge was accompanied by speculation about an S&P 500 inclusion, though it wasn't selected in the September rebalance.

Both Astera Labs and Marvell Technology monetize AI's connectivity bottleneck from distinct angles. Astera is a specialized rack-scale connectivity play, while Marvell offers a broader product portfolio. Astera expects a production ramp of the Scorpio X-Series 320-lane fabric switch in Q3 to drive revenue growth, along with opportunities in Aries, Taurus, and Leo.

The bullish case for Astera lies in content growth, as each new AI rack generation requires more connectivity silicon and software. Conversely, the bear case revolves around dependence on a few hyperscale customers, product-transition timing, and a valuation based on strong adoption before design wins turn into revenue. Hedge-fund interest in Astera Labs increased from 53 in March to 73 at June 30, with Hedge-fund breadth also strengthening for Marvell, going from 79 in Q1 to 96 in Q2.

However, the short interest in Astera Labs has slightly decreased, which weakens the short-squeeze explanation. Both Astera Labs and Marvell Technology must maintain production revenue, customer diversification, and gross margins as networking standards and optical architectures evolve. Investors should also consider revenue concentration and inventory levels, as faster component launches might not always translate into quicker customer adoption.

While acknowledging the potential of these two AI stocks, the editorial believes other AI stocks might offer greater upside potential with less downside risk.