CRDO vs. ALAB: Which High Speed Connectivity Stock Has More Upside?

Credo Technology Group Holding Ltd. CRDO and Astera Labs, Inc ALAB are companies that specialize in high-speed connectivity solutions essential for AI and data center infrastructure. Both CRDO and ALAB are upcoming players in this domain and bring to the table unique strengths, which makes it an intriguing comparison for investors.

So, now the question arises: Which stock makes a better investment pick at present? Let’s take a deep dive into the pros and cons for each company.

The Case for CRDO

CRDO’s explosive top-line growth validates its business strategy. Fiscal 2025 revenues rose 126% year over year to $436.8 million while fourth-quarter revenues surged 179.7% year over year to $170 million, reflecting accelerating adoption of Credo’s high-performance connectivity solutions.

Credo is gaining a strong market presence in both Ethernet and Active Electrical Cables (AECs) solutions specialized for data centers. AEC product line posted double-digit sequential growth in the fiscal fourth quarter. The demand for AECs is increasing as ZeroFlap AECs offer more than 100 times improved reliability than laser-based optical solutions. Moreover, Credo's system-level approach is giving it a competitive edge. It owns the entire stack of SerDes IP, Retimer ICs, system-level design, qualification and production. This integrated approach allows faster innovation cycles and strong cost efficiency. With demonstration of PCIe Gen6 AECs and increasing hyperscaler interest, this product line is expected to remain a growth engine going ahead.

Momentum in the optical business, particularly for Optical Digital Signal Processors (DSPs), bodes well. CRDO expects its 3-nanometer 200-gig-per-lane optical DSP (port speeds up to 1.6 terabits per second) to boost the industry’s transition to 200 gig lane speeds. Strength in PCIe retimers and Ethernet retimers is another catalyst. Shift to 100 gig per lane solutions and higher demand for system-level expertise and software capabilities for dealing with AI-optimized architectures bode well for CRDO’s retimer business.

While top-line growth often grabs eyeballs, Credo’s strength lies in its margin profile and operational discipline. The company is not only driving substantial product momentum but also showcasing the profitability of its business model. In fiscal 2025, operating margin expanded 2,500 basis points, reflecting strong top-line leverage fueled by product growth.

Robust outlook is fueling investor interest. For the first quarter of fiscal 2026, the company expects revenues between $185 million and $195 million, up 12% sequentially at the midpoint. For fiscal 2026, Credo anticipates revenues to surpass $800 million, implying more than 85% year-over-year growth. That said, increasing market competition and macroeconomic uncertainties may impact CRDO’s growth trajectory.

The Case for ALAB

Astera designs advanced interconnect products like PCIe, CXL and Ethernet semiconductor-based connectivity solutions used widely by hyperscalers and the data center ecosystem. In the last reported quarter, ALAB’s revenues grew 144% year over year driven by strength in Aries and Taurus business lines.

Both these businesses are expected to register sequential growth in the second quarter of 2025. For Aries, diversification across both GPU and custom ASIC-based systems for a range of applications (like scale-up and scale-out connectivity) is the key catalyst. Deployment of AI and general-purpose systems at ALAB’s prominent hyperscaler client is driving Taurus product line uptake.

ALAB’s focus on portfolio expansion with several new products like Scorpio Fabric Switches, retimers, Ethernet and PCIe active cable modules, CXL memory expansion and optical interconnects bodes well. PCIe 6 connectivity portfolio now boasts optical connectivity tech and gearboxes. The new gearbox is designed to bridge the speed gap between the current PCIe 5 ecosystems and new PCIe 6 devices.  PCIe 6 over optics technology and proliferation of UALink bode well. UALink has been referred to by ALAB as a pathway to a “multi billion dollar additional market opportunity” by 2029. Astera targets to ship UALink solutions from 2026. Further tailwinds also include PCIe Gen 7, 800-gig Ethernet and CXL 3.

Astera Labs expects second-quarter 2025 revenues between $170 million and $175 million, up 7-10% quarter over quarter.

ALAB’s increasing R&D investment, while a necessity, might prove a drag on margins if revenue growth falters. Operating expense is expected to be between $73 million and $75 million in the second quarter of 2025, driven by higher R&D expenses. Intensely competitive semiconductor landscape, along with dynamic macro environment, and other variables, including tariffs and changing export restrictions, remain concerns.

Price Performance and Valuation for CRDO & ALAB

Over the past month, CRDO and ALAB have registered gains of 13.2% and 41.8%, respectively.

In terms of the forward 12-month price/sales ratio, CRDO is trading at 19.30X, higher than ALAB’s 24.64X.

How Do Zacks Estimates Compare for CRDO & ALAB?

Analysts have significantly revised estimates for CRDO’s bottom line in the past 60 days.

Meanwhile, for ALAB, there is a marginal upward estimate revision.

CRDO or ALAB: Which is a Better Pick?

Both CRDO and ALAB are well-positioned to gain from the rapidly growing AI-driven data center market.

CRDO flaunts a Zacks Rank #1 (Strong Buy) at present, while Astera Labs carries a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, CRDO seems to be a better pick at the moment.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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