The Secret Sauce That Could Make Credo Technology A 10-Bagger

I found this comment on prospects for Credo Technology, still regarded as an under-the-radar AI stock.

The Mizuho team noted the company’s 65% gross margin, saying it finds Credo “an attractive company with competitive advantages” in serializer/deserializer intellectual property, or SerDes IP, which allows for fast movement of data inside and between chips. This advantage, the analysts said, could “drive materially lower [total cost of ownership] in data centers” in comparison to Credo’s competitors. The total addressable market for SerDes IP could reach about 15 times Credo’s current AEC revenue run rate of about $650 million per year. The Susquehanna team said that although it is “still early,” Credo looks to be showing excitement around the expanding market opportunity for its AEC offerings in rack-to-rack solutions due to positive customer feedback on DSP-based copper, or copper cables improved by digital signal processors. The technology is used to increase data speed and distance, mostly in AI data centers. Credo was also confident in its optical DSP business, and looks to be “on track to double revenue here” in fiscal year 2026, the Susquehanna analysts said.

Credo’s dominance in copper cables and upcoming optical products are part of Klein’s bull thesis for the company. But Klein said the scale-up of rack designs for graphics processing units and application-specific integrated circuits to connect more of the chips together represents perhaps the “biggest upside potential” for the company’s growth and future revenue.

That could expand Credo’s total addressable market “massively,” Klein wrote, though the opportunity is “going to evolve gradually and take several more years.” 

Morningstar, 4 September 2025. Mizuho desk-based analyst Jordan Klein, who’s associated with the sales team and not the bank’s research unit, called Credo “one of the best AI stories” that is “just getting better” in a separate note on Thursday. With expectations for the company “as high as you will ever find” in the technology, media and telecommunications sector, Credo was still able to deliver a beat, Klein noted, adding that he expects enthusiasm for its stock to “only intensify today off this beat and guide.

What is this all about?

The “scale up” of GPUs and Application-Specific Integrated Circuits (ASICs) refers to the high-performance, low-latency, intra-rack interconnection of multiple chips within a single system to operate as a unified, powerful unit. Technologies like NVIDIA’s NVLink facilitate this by creating ultra-fast, direct connections, enabling a single, more powerful virtual chip and boosting performance for AI workloads by increasing throughput and reducing latency. This “Scale-Up” approach is essential for handling the computational demands of massive models and complex AI tasks where speed and efficiency are paramount.  

AI Overview

Credo’s business is based on partnerships with hyperscalers, companies like Amazon, xAI (Elon Musk’s AI business), Microsoft and Meta Platforms. We don’t know how much of the business is hyperscalers, but until recently, analysts believed that Amazon alone accounted for 85pc of sales. This helps explain the current explosive growth as the group adds more hyperscalers.

It also focuses attention on broadening the product range. Compared to what the hyperscalers are investing in data centres, their spend with Credo is peanuts.

Our research shows that by 2030, data centers are projected to require $6.7 trillion worldwide to keep pace with the demand for compute power. Data centers equipped to handle AI processing loads are projected to require $5.2 trillion in capital expenditures, while those powering traditional IT applications are projected to require $1.5 trillion in capital expenditures (see sidebar “What about non-AI workloads?”). Overall, that’s nearly $7 trillion in capital outlays needed by 2030—a staggering number by any measure.

The value in AI lies at the application layer—how enterprises turn AI into real business impact. If companies fail to create meaningful value from AI, demand for compute power could fall short of expectations. Conversely, transformative AI applications could fuel even greater demand than current projections suggest.

Continuous advancements in AI technologies, such as processors, large language model (LLM) architectures, and power consumption, could significantly enhance efficiency. For instance, in February 2025, Chinese LLM player DeepSeek reported that its V3 model achieved substantial improvements in training and reasoning efficiency, notably reducing training costs by approximately 18 times and inferencing costs by about 36 times, compared with GPT-4o.²  However, preliminary analysis suggests that these types of efficiency gains will likely be offset by increased experimentation and training across the broader AI market. As a result, efficiency gains may not substantially impact overall compute power demand over the long term.

McKinsey & Co. (management consultants), 28 April 2025

Sustained growth for Credo will come partly from netting more hyperscalers and other big customers but also from broadening its product range. The company. is well aware of the challenge and the opportunity.

As hyperscalers and data center operators accelerate investments in AI-driven infrastructure, we provide state-of-the-art solutions for the most demanding connectivity needs, supporting data rates up to 1.6 terabits per second across a range of industry protocols. Credo’s growth has been fueled by strategic partnerships with hyperscalers and key customers, built on our ability to tackle their most complex connectivity challenges. We achieved this by delivering optimized solutions that span the design, development, qualification, and production across our entire product line. Our three-tiered innovation framework comprising of purpose-built Certeus technology, advanced integrated circuit design, and system-level development approach integrates seamlessly with our pilot software and firmware platform, empowering customers to streamline system development and achieve peak performance, yield, and reliability.

Our innovative system-level approach has driven our leadership in pioneering the active electrical cable or AEC market. Looking ahead, we are applying this proven strategy to pursue additional system-level opportunities driven by the demand for better reliability, energy efficiency, and performance. We expect our approach will lead to continued diversification in terms of customers, protocols, and applications. We look forward to announcements over the next several months, including at upcoming trade shows.

Bill Brennan, CEO, Credo Technologies, Q1 2026, 3 September 2025

There is a powerful moat around Credo’s business because the company works with its customers to develop new and better solutions to their problems.

AECs offer an unequaled combination of reliability, signal integrity, power efficiency, and system cost, all critical to building and scaling leading-edge AI clusters. We’ve seen AEC adoption at data rates of 50 gig and 100 gig per lane, and we see this continuing for 200 gig per lane 1.6 terabit per second solutions as next-generation architectures ramp. We also see the trend towards GPU and cluster density to continue to be a catalyst for an expanding AEC TAM. Over the past year, we’ve seen customer interest for AECs expand from inter-rack solutions to rack-to-rack solutions.

Advances in liquid cooling and power sourcing have driven a quadrupling of GPU density with one customer, which enables them to architect their entire scale-up network with AECs up to seven meters in length. Reliability and power efficiency led to choosing AECs over optical solutions, as they are up to 1,000 times more reliable and consume half the power. AECs virtually eliminate link flaps, which are intermittent losses of connection, boosting cluster reliability and productivity while reducing power consumption. Our system-level approach drives innovation, accelerates time to market, and delivers a distinct competitive edge.

By owning and delivering the entire solution stack, including SerDes IP, retimer ICs, system-level design, qualification, and production, Credo has forged strong customer relationships and solidified its position as the leader in the AEC market. Moving forward, we’ll continue driving innovation with PCIe AECs and other advanced products coming to market in the near future. Let me now turn to the optical market. During the first quarter, we sustained strong momentum in our optical business, positioning us as on track to achieve our goal of again doubling optical revenue in fiscal 2026. We’re delivering cutting-edge DSP solutions to an expanding roster of optical module customers and their hyperscale end users.

With our expertise in optical DSPs, the rigorous connectivity demands next-generation applications. Our collaborative approach with customers helps ensure solutions that enhance performance, scalability, and power efficiency, further building on our position in the market. We provide customers with a leading-edge portfolio of innovative full DSP and linear receive optical or LRO solutions, supporting port speeds up to 1.6 terabits per second. For several years, the industry has debated the shift from copper to optical connectivity solutions. While consensus holds that copper will remain prevalent in the foreseeable future, Credo is strategically prioritizing optical solutions as a cornerstone of our product roadmap. We see an expanding TAM for both copper and optical connectivity solutions.

We’re excited by the opportunity to bring our system-level expertise to bear in the optical market, further diversifying our position. We look forward to discussing these innovations in the coming months.

Bill Brennan, CEO, Credo Technologies, Q1 2026, 3 September 2025

Credo is in no doubt that it has an exciting pipeline to drive expanding relationships with a growing number of large customers.

Our recently launched PCIe retimer family is gaining significant traction, driven by robust customer engagements.

Leveraging the expertise of our world-class SerDes design team, our PCI solutions deliver an unparalleled combination of maximum reach and minimal latency, a rare achievement as these attributes are typically a trade-off. Our engineering team’s innovative design approach has resulted in a truly differentiated solution. Our top-tier devices, coupled with our award-winning pilot debug and telemetry tools, empower customers to integrate our solutions with faster time to market and better reliability. We are on track to secure PCI design wins in calendar 2025, with production revenue expected in calendar 2026.

Our expansion into PCIe-based solutions for AI scale-up networks significantly broadens our TAM, and we are well-positioned to capitalize on the industry shift to 200 gig per lane scale-up solutions in the future, ensuring sustained growth and competitiveness. To summarize, during 2026, Credo reported its highest quarterly revenue and profitability to date, reflecting exceptional operational execution to meet customer demand. Over the past several quarters, Credo has achieved extraordinary growth fueled by the surging demand for AI infrastructure. Credo is poised for continued success, with a clear path for growth through fiscal 2026 and beyond.

Bill Brennan, CEO, Credo Technologies, Q1 2026, 3 September 2025

I am no geek to put it mildly. I struggle to work a mobile phone, but I get a huge feeling that there is something special about Credo Technologies.

Over the medium and long term, we anticipate multiple waves of growth opportunities, fueled by the evolving scale-out and scale-up networks and next-generation training and inference architectures. We expect that each of these waves will drive growing demand for innovative connectivity solutions, spanning diverse physical mediums, distances, and protocols. Credo occupies a unique position in the industry as one of the few companies worldwide capable of delivering cutting-edge SerDes technology at the advanced speeds we’re currently qualifying. By combining this core SerDes differentiation, central to our competitive edge, with our integrated circuit expertise and system-level design approach, we deliver solutions optimized to meet each customer’s needs. Credo has become a high-value partner in the unprecedented build-out of hyperscale infrastructure.

Bill Brennan, CEO, Credo Technologies, Q1 2026, 3 September 2025

If this stock proves to be a sensational investment over the next decade, nobody can say they didn’t warn us. And what they are saying makes so much sense. Nvidia represents a huge chunk of the projected spending on AI infrastructure, but Credo, with 2025/26 revenue coming in at around $1 billion, is a fraction of a per cent. It would be so easy for the company to boost its market share, and that is exactly what it intends to do.

Share Recommendations

Credo Technologies

Strategy – Keep Accumulating Credo Shares

Now and then, I get super excited about a stock. I am keen on all 26 of my Top 20 stocks, even when they are falling down a snake rather than climbing up a ladder. Credo is hot just now after a spectacular set of results and could react at any time. Still, the outlook for this relative tiddler on the giant AI infrastructure stage is massively positive, and a programme of accumulation should reap rich rewards.

The shares have been staggeringly volatile in the past. Investors worried about customer concentration and a sudden bunching of insider sales by management, which triggered a plunge in the share price that was quickly reversed. If you are as small as Credo, especially before the latest sales surge, having just one customer, if it is Amazon, would not necessarily be such a bad thing. Now it has four hyperscaler customers and most probably will land more, and it has the cash flow and balance sheet strength to invest at scale in improving its products and winning a greater share of its customers’ gigantic budgets.

The future is always a mystery, but common sense suggests that Credo Technologies has a massive opportunity and good odds that it will take it, given its success to date. CEO, Bill Brennan, strikes me as a level-headed, supremely competent manager, just the guy you want in charge for an opportunity like this.