Astera Labs vs. KLA: Which Semiconductor Stock Has More Upside?

Core Insights - Astera Labs (ALAB) and KLA Corporation (KLAC) are significant players in the semiconductor industry, with ALAB focusing on high-speed connectivity solutions for AI-driven data centers and KLAC providing advanced process control and inspection solutions for semiconductor manufacturing [1][2]. Semiconductor Market Growth - The global semiconductor market size was $598.06 billion in 2025 and is projected to grow to $1,477.06 billion by 2034, reflecting a CAGR of 10.60% from 2026 to 2034 [2]. Astera Labs (ALAB) Overview - ALAB is leveraging a robust and diversified product portfolio to meet the increasing demands of AI infrastructure and connectivity solutions, with strong demand for its PCIe solutions driving growth [3][6]. - In Q4 2025, ALAB expanded its product offerings with custom NVLink Fusion connectivity solutions aimed at optimizing AI infrastructure performance and reducing costs [4]. - The company is also enhancing its Smart Fabric Switch roadmap to cater to next-generation scale-up networking, with the merchant scale-up switching market expected to reach $20 billion by 2030 [5]. KLA Corporation (KLAC) Overview - KLAC's strong portfolio and leadership in process control systems enable customers to manage increasing design complexity, accelerating time to market for diverse semiconductor designs [7]. - Advanced packaging revenue for KLAC grew over 70% year over year in 2025, with continued growth expected in 2026 [8]. - KLAC's solutions are critical for AI-driven applications, utilizing AI-driven analytics to optimize chip manufacturing [9]. Financial Performance - In the trailing 12-month period, ALAB shares surged 53.3%, while KLAC shares increased by 102.9%, attributed to KLAC's dominant market share and strong investment in AI infrastructure [12]. - ALAB expects Q1 2026 revenues between $286 million and $297 million, driven by strong demand for PCIe and AI solutions [11]. - The Zacks Consensus Estimate for ALAB's 2026 earnings is $2.39 per share, indicating a 29.89% year-over-year increase, while KLAC's estimate is $36.58 per share, reflecting a 9.92% year-over-year increase [18]. Valuation Insights - Both ALAB and KLAC shares are currently considered overvalued, with ALAB trading at a forward Price/Sales ratio of 15.69X and KLAC at 13.08X [16]. - ALAB is facing challenges with profit margins due to a shift towards a higher mix of hardware sales and increased operating expenses from R&D and acquisitions [13]. Conclusion - While both companies are positioned to benefit from the growing semiconductor market, KLAC presents a greater upside potential due to its leadership in process control and advanced packaging growth [21].