CRDO vs. ALAB: Which High Speed Connectivity Stock Is the Smarter Buy?

Amid artificial intelligence (“AI”) proliferation, investors are focusing on companies that offer the infrastructure behind it. This is creating strong market opportunities for companies that specialize in high-speed connectivity solutions that are essential for AI data centers.

Credo Technology Group Holding Ltd. CRDO and   Astera Labs ALAB are prominent pure-play beneficiaries of this trend. Both players bring their unique strengths to the table, making it an intriguing comparison for investors.

Now the question arises: which stock makes a better investment pick at present? Let us dive into the fundamentals, valuations, growth outlook and risks for each company.

CRDO: New Growth Pillars & Cash Strength

Although CRDO’s leadership in the AEC space is at the heart of the growth story, it is now focusing on the IC portfolio, which includes retimers and optical DSPs, and has 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.

Management noted that it remains “well capitalized” to continue to fuel the next leg of growth, while maintaining a considerable cash buffer. At the end of the last reported quarter, it had a fortified balance sheet, boasting a cash position of $813.6 million. The company generated cash flow from operating activities of $61.7 million, up $7.5 million sequentially, while free cash flow totaled $38.5 million.

This cash strength is strategically valuable as Credo deepens its role in the hyperscale ecosystem. Increasing funds offer Credo meaningful internal funding capacity to invest in system-level platform expansion and new product initiatives. The cash balance also boosts CRDO’s M&A efforts. Last year, CRDO acquired Hyperlume, which is a developer of miniature light-emitting diode (microLED) technology-based optical interconnects for chip-to-chip communication.

Credo expects revenues between $335 million and $345 million, implying 27% sequential growth at the midpoint for the fiscal third quarter. Revenues surged a staggering 272% year over year to $268 million in the second quarter of fiscal 2026. The company anticipates more than 170% year-over-year growth in fiscal 2026 and net income to more than quadruple. Meanwhile, non-GAAP operating expenses are expected to rise 50% year over year in fiscal 2026.

ALAB: Strength in Product Lines

Founded in 2017, Astera designs advanced interconnect products, including PCIe, CXL and Ethernet semiconductor-based connectivity solutions, which are widely used by hyperscalers and the data center ecosystem. The company’s top line is gaining from strength in signal conditioning (Aries, Taurus) and Switch Fabric (Scorpio) and Leo CXL memory expansion products. 

Strong business momentum for ALAB is underpinned by its expanding role in delivering comprehensive connectivity infrastructure at the rack scale, which it terms as AI Infrastructure 2.0. A key pillar of Astera Labs’ outlook is Scorpio, particularly the upcoming X-Series, which management views as an anchor socket in next-generation AI racks. Management highlighted that Scorpio X-Series is already shipping in preproduction quantities and expects volume ramp throughout 2026. 

With Aries 6, ALAB has a first-mover advantage as these products are the industry’s first and only PCIe 6 retimers shipping in high volume. ALAB expects further business opportunities for its Aries PCIe 6 smart retimer business as AI racks built around custom AI accelerators and new merchant accelerators begin to adopt PCIe 6. Taurus Ethernet smart cable modules represent a second leg of growth, benefiting from volume expansion. Given the momentum, ALAB expects fourth-quarter revenues to be between $245 million and $253 million, up 6% to 10% sequentially.

ALAB has a strong liquidity profile with about $1.13 billion as cash, cash equivalents and marketable securities at the end of the third quarter of 2025. Cash flow from operating activities came in at $78.2 million. The cash balance provides flexibility to keep investing in R&D and strategic initiatives, including acquisitions such as aiXscale Photonics. Astera Labs is also investing in opportunities such as UALink and highlighted that customer activity around UALink remains “strong”. UALink solutions are expected to be available in the second half of 2026, with early revenues in 2027. It is also collaborating with hyperscalers to develop solutions to support NVLink connectivity.

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 $85 million and $90 million in the fourth quarter of 2025, driven by higher R&D expenses and incremental operating expenses from the Xscale acquisition. Intensely competitive semiconductor landscape, along with dynamic macro environment and other variables, including tariffs, remains a concern.

Price Performances & Valuations of CRDO & ALAB

In the past month, CRDO and ALAB have gained 0.7% and 5.5%, respectively.

In terms of the forward 12-month price/sales ratio, Credo is trading at 17.94X, lower than ALAB’s 25.98X.

How Do Zacks Estimates Compare for CRDO & ALAB?

Analysts have revised earnings estimates upwards by 36.3% for CRDO for the current fiscal year in the past 60 days.

There is no revision for ALAB’s bottom line.

CRDO or ALAB: Which Is a Better Pick?

Credo and Astera Labs are well-positioned to gain from the rapidly growing AI-driven data center market.

CRDO currently flaunts a Zacks Rank #1 (Strong Buy) and ALAB carries a Zacks Rank #3 (Hold).

In terms of the Zacks Rank, CRDO appears 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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