Artificial intelligence (AI) continues to dominate as a focal point for investment in technology sectors, with Wall Street highlighting its importance in 2026. Notably, Bank of America analysts underscore the AI industry as a critical area for growth. Within this ecosystem, two semiconductor firms, Navitas Semiconductor and Astera Labs, stand out due to their roles in supplying integral parts to the data centers that underpin AI systems.
Both companies are positioned to benefit from anticipated expansion in global data center capacity, which is expected to more than triple by 2030 in response to rising AI demand. However, differences in their business models, recent financial performance, and valuation metrics suggest distinct investment profiles. The decision to prioritize one over the other warrants an examination of their respective operational focus, recent results, and strategic outlooks.
Navitas Semiconductor's Strategic Shift
Navitas Semiconductor specializes in manufacturing semiconductors designed for power conversion applications, including charging solutions. Its primary competitive edge lies in delivering products that maximize electrical efficiency. This efficiency is particularly important given that modern data centers can be as large and power-intensive as small cities.
This strength facilitated a partnership with Nvidia, a prominent technology entity acknowledging existing data center architectures are insufficient to support increasing AI power needs. Nvidia collaborates with Navitas and other firms to establish the necessary infrastructure for AI deployment.
Despite this partnership’s positive influence on Navitas's stock price, the company’s sales performance tells a different story. In the third quarter of 2025, Navitas reported revenues of $10.1 million, marking a 53% decline from $21.7 million in the same period of 2024. This sharp downturn resulted from the company’s deliberate exit from the mobile and consumer markets in China, which had previously accounted for approximately 60% of its 2024 revenue.
Management’s decision to withdraw from these markets aims to refocus resources toward "high-power, high-growth markets such as AI data centers," as articulated by CEO Chris Allexandre. The company anticipates continued revenue decline in the fourth quarter, forecasting sales around $7 million, which equates to less than half of the $18 million achieved in the fourth quarter of the previous year.
This contraction reflects the challenges inherent in Navitas’s transition strategy. Yet, the company projects a reversal in this trend starting in 2026, with expectations for sequential quarterly revenue growth and gradual gross margin improvement. The margin expansion is attributed to moving away from lower-margin segments previously centered in China.
Astera Labs' Growth Trajectory
Astera Labs operates in the connectivity segment, providing solutions enabling efficient communication among AI servers. Additionally, it offers software tools designed to streamline management of complex AI infrastructure for its clientele.
These capabilities have also led to a strategic alliance with Nvidia. Astera recently reported record third-quarter revenue of $230.6 million, representing a substantial 104% increase year-over-year. The company expects to sustain this momentum into the fourth quarter, with anticipated revenues ranging between $245 million and $253 million, significantly higher than the $141.1 million recorded in the year-ago quarter.
The strong and accelerating revenue growth highlights the market's favorable reception to Astera's integrated hardware and software offerings. The firm’s emphasis on open standards facilitates a plug-and-play approach, which enhances customers’ ability to deploy AI infrastructure efficiently, positioning Astera advantageously for continued expansion in 2026.
Comparing Value and Investment Considerations
Astera's ascending revenue contrasts starkly with Navitas's recent declines, initially suggesting that Astera is the more compelling investment candidate. However, this comparison is nuanced by Navitas's expectations of revenue rebound and margin enhancement in the upcoming year. Investors are thus challenged to weigh Navitas’s turnaround prospects against Astera’s current robust performance.
Valuation metrics provide additional context for these investment considerations. Examining each company's price-to-sales (P/S) ratio reveals that Navitas has consistently presented a lower multiple relative to Astera throughout 2025. This metric indicates that investors pay less for each dollar of Navitas's trailing twelve-month revenue compared to Astera.
Astera's premium valuation is justified in part by its rapid sales growth and positive profitability metrics, having posted a net income of $91.1 million in the third quarter. Conversely, Navitas incurred a net loss of $19.2 million over the same period. Notwithstanding Astera's P/S ratio decreasing from earlier in the year, it remained above 40 times trailing sales as of December 23, indicative of a high valuation.
Consequently, Navitas appeals to investors with an appetite for risk who are persuaded by its strategic refocusing on AI data centers and potential for growth acceleration. Nonetheless, confirmation of this recovery via upcoming quarterly earnings remains crucial before committing capital.
For investors favoring companies with demonstrable demand and solid earnings, Astera appears more attractive. However, given its elevated valuation, patience may be advisable until share prices offer a more reasonable entry point.
Key Points
- Navitas Semiconductor is undergoing a strategic retreat from lower-margin Chinese consumer markets to concentrate on AI data centers, resulting in recent revenue declines but potential for recovery in 2026.
- Astera Labs boasts strong revenue growth and profitability driven by its connectivity solutions for AI infrastructure, backed by a partnership with Nvidia.
- Valuation metrics show Navitas as a more inexpensive option on a price-to-sales basis, whereas Astera's higher valuation reflects its superior sales momentum and earnings.
Risks and Uncertainties
- Navitas's turnaround is contingent upon successful expansion into AI data center markets, which remains to be demonstrated in upcoming financial results.
- Astera's high valuation may pose a risk of price correction, potentially impacting investor returns if market expectations are not met.
- Both companies operate in a highly competitive and rapidly evolving semiconductor sector where shifts in technology or partnerships could materially affect performance.