CRDO Deepens Ties With Hyperscalers: Key to Next Growth Phase?

Hyperscaler partnerships are key to Credo Technology Group Holding Ltd.’s (CRDO) rapid growth, enabling market share expansion through scale, diversification and adoption of active electrical cables (“AEC”) and optical solutions that power next-gen AI data centers. With the advent of AI, edge computing and 5G, hyperscalers are constantly in need of upgrading their network infrastructure to manage data-intensive workloads. This creates lucrative opportunities for companies like Credo, which can address these hyperscalers’ unique needs.

It delivers advanced connectivity solutions, supporting data rates up to 1.6 terabits per second across various industry protocols. Hyperscaler demand for AI-driven data center infrastructure led to Credo’s 274% year-over-year revenue increase in the first quarter of fiscal 2026. Three hyperscalers each contributed more than 10% to total revenues in the quarter. A fourth hyperscaler began contributing materially and is expected to exceed the 10% threshold in fiscal 2026. Credo expects two more hyperscalers to ramp up in the coming quarters, further increasing customer diversification.

Management expects all major hyperscalers to adopt AECs in the future. CRDO states that AECs are valued for 1000x higher reliability, 50% lower power consumption and lower system costs compared to optical. As the market shifts beyond PCIe Gen 6, different hyperscalers are expected to adopt varying protocols. CRDO’s system-level approach fuels innovation, strengthens hyperscaler customer ties and solidifies its foothold in the AEC market, with new PCIe AECs and advanced products on the way.

However, the electronics semiconductor market is dominated by giants like Marvell Technology (MRVL) and emerging ones like Astera Labs (ALAB). Hyperscalers present a huge market opportunity that everyone is trying to win, and Credo’s ability to execute effectively will be a key determinant of its success.

How CRDO’s Peers Stack Up With Hyperscalers

Wilmington, DE-based Marvell continues to benefit from the strong demand environment across the data center end market. Its multigenerational custom engagements with the hyperscalers provide insight into upcoming XPU architectures, allowing it to design scale-up switches for both Ethernet and UALink fabrics optimized for AI. Its design pipeline has expanded to more than 50 opportunities worth $75 billion, underscoring hyperscalers’ growing reliance on Marvell’s differentiated capabilities. With early wins providing visibility into hyperscaler roadmaps and increasing complexity favoring full-service providers, Marvell is strongly positioned to capture a larger share of this structural AI wave.

MRVL’s data center interconnect business is expanding with rapid uptake among major hyperscalers. For the long term, Marvell is pushing boundaries with 400G per lane PAM technology, enabling 3.2T optical interconnects and future-proofing hyperscaler infrastructure. However, its AI-driven custom silicon growth is heavily dependent on hyperscalers, with 74% of fiscal second-quarter revenues from data centers and more than 90% tied to AI and cloud demand. Any hyperscaler slowdown, rollout delays, or move to in-house chips could significantly affect results.

Astera Labs develops cutting-edge interconnect products such as PCIe, CXL and Ethernet semiconductor-based connectivity solutions, which are widely used by hyperscalers and the data center ecosystem. From 2026, hyperscalers will roll out advanced AI Infrastructure, favoring purpose-built solutions in open, multi-vendor ecosystems. It sees this shift as a major growth catalyst, with its rich portfolio positioning it well for next-gen designs.

UALink offers an optimized scale-up strategy for AI accelerators with strong performance, an open ecosystem and a diverse supply chain. With growing hyperscaler and compute provider interest, ALAB is leading its development and plans a full portfolio of UALink solutions, positioning it for long-term growth from 2027 onward. In June, Astera Labs and Alchip partnered to combine custom ASICs with advanced connectivity, delivering interoperable rack-level solutions for hyperscalers’ next-gen AI infrastructure within tight development timelines.

CRDO Price Performance, Valuation and Estimates

Shares of CRDO have gained 144.6% year to date compared with the Electronics-Semiconductors industry’s growth of 36.2%.

In terms of the forward 12-month price/sales ratio, CRDO is trading at 27.39, higher than the Electronic-Semiconductors sector’s multiple of 9.51.

The Zacks Consensus Estimate for CRDO earnings for fiscal 2026 has been revised upward significantly over the past 60 days.

CRDO currently sports a Zacks Rank #1 (Strong Buy). 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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