Is Credo Technology Still a Buy After 55% Gain in the Past 6 Months?

Over the past six months, Credo Technology Group Holding Ltd (CRDO) has surged roughly 54.5%, outpacing the Electronic-Semiconductors and the broader Computer and Technology sector’s growth of 26.3% and 19.1%, respectively. Much of the momentum stems from the AI infrastructure cycle that is driving demand for high-speed, energy-efficient data center connectivity solutions.

Price Performance

As AI clusters scale into the hundreds of thousands of GPUs and push toward million-GPU configurations, reliability, signal integrity, latency, power efficiency and total cost of ownership have become “mission-critical”. Credo’s architecture (purpose-built SerDes technology, sound IC design and a system-level development approach) is tailored to meet these demands.

However, such gains are bound to raise the obvious question: has Credo’s growth already been priced in or is it still an opportunity given the forward runway?

Let’s dig deeper and assess whether the stock is still a buying opportunity.

CRDO’s Rides AI Infra Cycle

CRDO’s AECs (Active Electrical Cables) business is at the heart of its growth story. AECs have quietly emerged as one of the critical components behind AI networking build-outs. The rapid uptake of zero-flap AECs is mainly due to these cables offering up to 1,000 times more reliability with 50% lower power consumption than optical solutions, added CRDO.

It noted that AECs, now scaling to 100-gig per lane and transitioning to 200-gig per lane architectures, have become the “de facto” standard for inter-rack connectivity. These are now replacing optical rack-to-rack connections up to 7 meters.

In the last reported quarter, four hyperscalers each contributed more than 10% of total revenues, reflecting strong adoption of Credo’s high-reliability AEC solutions. Management noted that the fourth hyperscaler is in full volume; however, the more significant development in the fiscal second quarter was the emergence of a fifth hyperscaler, which has begun contributing initial revenues. The company also highlighted that customer forecasts have strengthened across the board in recent months. This marks a major inflection point.

Beyond AECs, Credo’s IC portfolio, which includes retimers and optical DSPs, continued to show a healthy performance. Credo’s PCIe retimer program remains on track for design wins in fiscal 2026 and revenue contributions in the next fiscal year.

The introduction of three additional pillars, each representing a multi-billion-dollar opportunity, bodes well. These include Zero-Flap optics, active LED cables and OmniConnect gearboxes (Weaver).

These three, along with AECs and IC solutions (retimers and optical DSPs), collectively present a total market opportunity likely to surpass $10 billion, more than tripling Credo’s market reach just 18 months ago, as highlighted by management.

CRDO’s improving profitability is another thing investors need to watch for. In the last reported quarter, non-GAAP gross margin expanded 410 basis points (bps) to 67.7% during the quarter under review, coming in above the high end of the company’s guidance. Non-GAAP operating income was $124.1 million compared with $8.3 million reported in the prior-year period.

Credo also has a clean balance sheet. As of Nov. 1, 2025, CRDO had $813.6 million of cash and cash equivalents and short-term investments compared with $479.6 million as of Aug. 2, 2025. This financial firepower provides ample flexibility to invest in innovation and inorganic expansion.

Given these, Credo expects revenues between $335 million and $345 million, implying 27% sequential growth at the midpoint for the fiscal third quarter. The company anticipates more than 170% year-over-year growth in fiscal 2026 and net income to more than quadruple.

However, no investment case is without risks. Higher expenses, exposure to the AI investment cycle amid increasing market competition from the likes of Broadcom (AVGO), Marvell Technology (MRVL) and newer entrants like Astera Labs (ALAB), and macroeconomic uncertainties may impact CRDO’s growth trajectory.

What to Make of CRDO’s Premium Valuation?

In terms of the forward 12-month price/sales ratio, CRDO is trading at 17.22, higher than the Electronic-Semiconductors sector’s multiple of 8.58. The premium valuation, to an extent, is justified due to its long growth runway, with meaningful upside still available if management continues with solid execution.

In comparison, Broadcom trades at a forward 12-month P/S multiple of 16.34, while Astera Labs and Marvell are trading at a multiple of 25.96 and 7.68, respectively.

Over the past six months, gains for AVGO, MRVL and ALAB sit at 26.8%, 24.9% and 100.4%, respectively.

CRDO Is a Buy

Credo is well-positioned to gain from a powerful AI infrastructure cycle, with AEC momentum, expanding hyperscaler wins and new multi-billion-dollar product pillars broadening its opportunity set.

Strengthening margins, accelerating revenue visibility and a solid balance sheet support future growth. Despite the sharp run-up and rich valuation, CRDO is still attractive for long-term investors willing to ride near-term volatility.

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