Market Rotates to Small-Cap Semis？NVIDIA Partners Astera Labs and Navitas Soar

After a sustained rally in large-cap semiconductor stocks, the market seems to be rotating into small-cap names. At the market close today, several small-cap semiconductor companies saw their shares soar. Among them, PCIe chip leader $Astera Labs (ALAB.US)$ and power chip company $Navitas Semiconductor (NVTS.US)$ surged 19% and 25% respectively, with Navitas continuing to climb another 5% in after-hours trading.

What these two companies have in common is their key collaboration with semiconductor giant $NVIDIA (NVDA.US)$ :

– Astera Labs: Provides critical PCIe, CXL, and NVLink connectivity solutions for NVIDIA's AI platforms (like HGX and Blackwell) to enable high-bandwidth, low-latency communication between GPUs and servers.

– Navitas: Collaborates with NVIDIA on developing high-efficiency power solutions for next-generation AI data centers, providing advanced GaN and SiC power chips to support higher power density 800V server power architectures.

As a leader in data center connectivity chips, Astera Labs has several key growth drivers to watch this year.

Rumored to Win AWS Trainium 4 I/O Die Order from Marvell

According to a report from the media Anue，ASIC powerhouse Alchip is set to maintain its leading market share in AWS's new AI training chip, Trainium 3, and has a solid position in the upcoming Trainium 4. Investment firms estimate that AWS Trainium 3 and its enhanced version will begin shipping in volume next year, with annual shipments projected at 800,000 to 1 million units and a total lifecycle volume of 1.8 to 2 million units.

For Trainium 4, analysts expect Alchip to handle the back-end design, while the I/O die business is rumored to be won by Astera Labs from $Marvell Technology (MRVL.US)$ . $Synopsys (SNPS.US)$ is expected to provide the SerDes IP. The contract is anticipated to be signed in the coming weeks, with mass production slated for 2028. This move is plausible, as Astera Labs already plays a significant role in AWS's earlier Trainium 2 chip, with each chip utilizing 128 of Astera's PCIe products. Therefore, its continued involvement and expanded role in providing the critical I/O for Trainium 4 aligns perfectly with its technical expertise and existing partnership.

Regardless of the final supply chain details, Astera Labs' deep integration into the custom silicon ecosystems of hyperscalers like $Amazon (AMZN.US)$ AWS, $Alphabet-A (GOOGL.US)$ , and $Microsoft (MSFT.US)$ is a core driver of its future growth.

Scorpio Product Line: A "Second Growth Curve" as an NVLink Alternative

In Q3 2024, Astera Labs announced its fourth major product line, the Scorpio Smart Fabric Switch, which is projected to expand the company's Total Addressable Market (TAM) to $12 billion by 2028.

The Scorpio line is designed to create a new standard for GPU connectivity:

– Scorpio P-Series: Targets server scale-out (connecting servers to each other), with a 1:1 attach rate to GPUs.

– Scorpio X-Series: Targets AI accelerator scale-up (connecting GPUs within a server), a market currently dominated by NVIDIA's NVLink. It has a 1:N attach rate to GPUs and is expected to become the larger opportunity.

The Scorpio P-Series has already reached pre-production delivery in Q2 2025, and the Scorpio line is expected to account for over 10% of total revenue in 2025. The X-Series is projected to ramp up in the second half of 2025, driving overall growth further into 2026.

Management Outlook

Astera Labs' management stated during their Q1 2025 earnings call that the Scorpio X solution will become a core component of next-generation AI racks. This trend could increase the value opportunity for Astera Labs to several hundred dollars per AI chip. The Scorpio X series began pre-production at the end of Q2 2025, with mass production expected to start in 2026.

Looking ahead, Astera Labs' revenue in the first half of 2025 is expected to be driven by its existing PCIe and Ethernet solutions. In the second half, the main drivers are projected to be the Scorpio P-Series for custom racks and its Aries 6 Smart Retimers. For Astera Labs, implementations based on custom ASICs for hyperscalers continue to present the most significant opportunities.

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