<div id="readability-page-1">Money Markets Credo Stock: The Smart Money AI Bet?  ByTrefis Team ,  Contributor.  Forbes contributors publish independent expert analyses and insights. Building a platform to do the job of 1 million analysts for  Great Speculations Follow Author Dec 04, 2025, 06:00am EST Share Save Comment  CANADA - 2025/09/04: In this photo illustration, the Credo Technology logo is seen displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Getty Images Credo Technology stock (NASDAQ:CRDO) has established itself as a vital facilitator of the generative AI era. After a significant earnings surprise that caused shares to rise nearly 10% on Tuesday, the company’s market capitalization has increased to approximately $33 billion. With stock performance up more than 2.5x year-to-date, Credo has positioned itself as one of the most significant recipients of the global AI infrastructure expansion. While NVIDIA creates the &#34;brains&#34; of the modern data center, Credo contributes to building the &#34;nervous system&#34;—the necessary high-speed connectivity that enables thousands of GPUs to operate as a single supercomputer.  While a single stock can generate excitement, it seldom sustains it. Financial advisors who succeed in the long term utilize disciplined allocation—mixing equities, gold, and alternatives through trusted partners like us.  The Financials: A Revenue Explosion  The recent increase in share price follows a stellar Q2 FY’26 earnings report that highlights the overwhelming demand for AI connectivity. Revenue: Jumped 272% year-over-year to $268 million, while adjusted net income surged more than 10x to $128 million ($0.67 per share). Guidance: The momentum is picking up, with Q3 revenue expected to reach as much as $345 million – a 156% growth compared to the previous year.  Credo Solves The “Interconnect Bottleneck” To train cutting-edge models like GPT-4 or Grok, data centers must connect tens of thousands of GPUs. However, conventional copper cables lose signal over short distances at high speeds, and optical cables are prohibitively expensive and generate excessive heat for short-rack connections. Credo addresses this physics challenge with Active Electrical Cables (AECs) and Bluebird DSPs.  AECs: These specialized cables are equipped with Credo chips that “clean” and enhance signals, permitting thinner, longer, and faster copper connections (up to 1.6 Terabits per second) without the heat and cost associated with optics.  Bluebird DSP: This technology specifically tackles power and efficiency issues in optical transceivers. By reducing latency and energy consumption in GPU communications, Credo alleviates the primary bottleneck in scaling next-generation AI workloads.  A “Leveraged Bet” on the Hyperscalers Credo’s growth narrative is fundamentally entwined with the capital expenditure (capex) competitions of the largest tech companies worldwide. Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) have indicated they may spend a total of $364 billion in capex for their respective current fiscal years.  MORE FOR YOU Credo serves as a proxy for this expenditure. The company’s revenue is heavily reliant on the “Big Four” competing to enlarge their GPU clusters. According to the company’s most recent earnings report:  Customer A: Represented 64% of quarterly revenue (widely believed to be Amazon/AWS).  Customer B: Made up 16% of revenue.  Overall In Q1 FY’26, three hyperscalers accounted for over 10% of revenue each, with a fourth beginning to ramp up.  This positions Credo not as a broad market investment, but as a focused bet that these three or four tech giants will persist in their competitive race.  The Inference Opportunity  A concern in the AI compute sector has been that as AI training decelerates, hardware demand will also significantly decrease. However, the move toward inference (utilizing the models to produce answers) could actually serve as a considerable boost for Credo. Why?  Inference necessitates high rack density to be cost-efficient. Operators maximize the number of GPUs packed into servers, leading to heat and space constraints that render thick, passive copper cables impractical.  Credo’s thin, flexible, and low-power AECs are ideally suited for these densely packed environments.  Additionally, since inference is sensitive to latency (users desire immediate answers), Credo’s electrical connectivity—which is faster than converting data into light for optics—provides a distinct technological edge.  Valuation: High Price, High Quality  Naturally, investors must consider valuation. Credo appears quite expensive—trading at approximately 26× trailing sales and over 120× earnings—but we contend that the valuation reflects the quality of its fundamentals. Revenue has surged by 176% over the past year and by 274% in the latest quarter, while its three-year average growth exceeds 74%. Profitability is robust, with a 19% operating margin and a 21% cash-flow margin, and the balance sheet is nearly debt-free with more than half of its assets held in cash.  When a company expands its revenue from $218 million to $600 million within a year, while preserving strong margins and low leverage, the market is typically willing to assign a premium. Thus, Credo is not a speculative, cash-burning AI venture, but a profitable, cash-generating growth entity with minimal leverage. Its rapid customer uptake and solid operating profile clarify why investors are willing to pay up despite the high multiples.  So, is it too late to invest? That ultimately depends on your risk tolerance. The company’s high customer concentration risk remains a concern. For investors focused on value, Credo certainly appears costly, and its history of sharp fluctuations—including a 62% drawdown during the inflation shock of 2022—underscores the risks. However, if adoption continues at the current trajectory, today’s high multiples may be justified by the company’s exceptional growth potential.  The Trefis High Quality (HQ) Portfolio , comprising 30 stocks, has a proven track record of comfortably outperforming its benchmark that includes all three – the S&amp;P 500, S&amp;P mid-cap, and Russell 2000 indices. What accounts for this? Collectively, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; a smoother investment experience, as demonstrated in HQ Portfolio performance metrics .  Editorial Standards Reprints &amp; Permissions LOADING VIDEO PLAYER... FORBES’ FEATURED Video</div>

CRDO

<p>Credo Technology (NASDAQ:CRDO) has seen its stock rise over 2.5x year-to-date, driven by its role in AI infrastructure. The company's Q2 FY'26 earnings report showed a 272% revenue increase to $268 million, with net income surging over 10x. Credo's technology addresses AI connectivity challenges, positioning it as a key player in the hyperscaler market. Despite high valuation, its strong fundamentals and nearly debt-free balance sheet support its growth narrative.</p>