Fred Alger Management, an investment management company, released its “Alger Mid Cap Focus Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q1 2025, U.S. equities faced increased volatility due to shifting fiscal, monetary, and trade policies. The rise of advanced AI models from China, which matched U.S. capabilities at lower costs, intensified this uncertainty. As a result, investors reevaluated the high capital expenditures of U.S. tech firms, leading to a sell-off in AI stocks and concerns over domestic AI returns. Against this backdrop, Class A shares of the Fund underperformed the Russell Midcap Growth in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Alger Mid Cap Focus Fund highlighted stocks such as Astera Labs, Inc. (NASDAQ:ALAB). Astera Labs, Inc. (NASDAQ:ALAB) engages in the manufacturing of semiconductor-based connectivity solutions for cloud and AI infrastructure. The one-month return of Astera Labs, Inc. (NASDAQ:ALAB) was 39.35%, and its shares have appreciated by 47.40% over the past 52 weeks. On May 28, 2025, Astera Labs, Inc. (NASDAQ:ALAB) closed at $96.46 per share, with a market capitalization of $15.908 billion.

Alger Mid Cap Focus Fund stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q1 2025 investor letter:

"Astera Labs, Inc. (NASDAQ:ALAB) is a semiconductor company specializing in connectivity solutions for data-centric systems, including cloud computing, artificial intelligence, and machine learning. Its products optimize data flow and performance in servers, GPUs, and AI accelerators, addressing bottlenecks in high-performance computing environments. The company’s Intelligent Connectivity Platform (ICP) integrates advanced semiconductor hardware with the proprietary COSMOS software suite, delivering customizable and cost-effective solutions. Backed by strong relationships with leading cloud and AI providers, we believe Astera is well positioned in rapidly growing markets, demonstrating high profitability and industry-leading gross margins. During the quarter, the company reported strong fiscal fourth-quarter operating results, where revenues beat analyst estimates. However, shares faced downward pressure following broader market dynamics, including concerns over emerging competition."

A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.

Astera Labs, Inc. (NASDAQ:ALAB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held Astera Labs, Inc. (NASDAQ:ALAB) at the end of the first quarter, which was 51 in the previous quarter. In Q1 2025, Astera Labs, Inc. (NASDAQ:ALAB) reported revenue of $159.4 million, up 13% from the prior quarter and up 144% from Q1 2024. While we acknowledge the potential of Astera Labs, Inc. (NASDAQ:ALAB) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Astera Labs, Inc. (NASDAQ:ALAB) and shared the list of stocks on Jim Cramer’s radar recently. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.