Credo Technology: Navigating Insider Sell-offs in a Golden Age of AI Infrastructure Growth

The tech sector's current paradox is epitomized by Credo Technology (CRDO): a company riding a tidal wave of AI-driven demand while grappling with insider selling that hints at short-term uncertainty. For investors, the question is stark: Does the exodus of executives selling shares signal caution, or is it a fleeting distraction from a multiyear growth story rooted in monopolistic technical advantages?

Q4 2024: A Quarter of Dominance in AI Infrastructure

Credo's fiscal Q4 2024 results (ended April 2024) set the stage for its meteoric rise. Revenue surged 89% year-over-year to $60.8 million, while non-GAAP gross margins hit 66.1%, fueled by surging demand for its 800G optical DSPs and Adaptive SerDes (AEC) solutions. By Q4 2025, revenue had skyrocketed to $170 million, a 26% sequential jump and 180% year-over-year growth, with margins expanding further to 67.4%. These figures underscore Credo's position as a leader in enabling hyperscalers like Amazon, Microsoft, and Meta to build AI supercomputers.

The company's 3nm 200G-per-lane optical DSPs—operating at 1.6 Tb/s speeds—are irreplaceable in data centers, where they slash power consumption and enable ultra-fast data transmission. Meanwhile, its Adaptive SerDes technology, which dynamically adjusts to signal quality, has become a backbone for next-gen AI chips.

The Insider Sell-off Conundrum

The paradox arises from Credo's insider selling, which has raised eyebrows. Over the past year, executives and directors sold millions of shares, often at prices near $70. Critics argue this signals overvaluation or misgivings about regulatory risks, such as the SEC's 2025 threat to revoke its Exchange Act registration.

Yet there's a critical nuance: institutional ownership remains robust at 80%, suggesting long-term confidence. Executives may be capitalizing on paper gains in a stock that has risen 150% since 2023, or diversifying personal portfolios. For investors, the question is whether these sales reflect pessimism about the business or simply wealth management.

Why the Bulls Are Right: Monopolistic Tech and AI Tailwinds

Credo's technical moat is unmatched. Its 800G DSPs are not just faster—they are 30% more power-efficient than rivals, a critical edge in hyperscalers' push to reduce data center costs. Competitors like Broadcom and Marvell lack Credo's 3nm design prowess, while Intel's in-house efforts remain unproven at scale.

The AI infrastructure boom is only accelerating. Credo's Q4 2025 guidance of $185–195 million in Q1 2026 revenue (a 12% midpoint growth) and non-GAAP margins of 64–66% highlight scalability. By fiscal 2026, optical product revenue could double, driven by hyperscalers' spending on AI servers.

Analysts are bullish: Needham and Barclays have $85 price targets, while Stifel sees $80. The consensus $72 target is a floor, not a ceiling, given Credo's $431 million cash pile and $54 million quarterly free cash flow.

Risks and Valuation: Worth the Worry?

Bearish concerns are valid but manageable:
1. Regulatory Risks: The SEC's actions remain unresolved, but Credo's cash reserves and global customer base provide a buffer.
2. High Valuation: At ~40x forward earnings, CRDO is pricey. However, its 40% non-GAAP net margin target for fiscal 2026 justifies premium multiples if execution holds.
3. Customer Concentration: Amazon's share dropped to 61% of sales (from 86% in 2023), with Microsoft and xAI now at 12% each. Credo's goal of 3–4 top customers each >10% by 2026 reduces dependency risks.

Investment Thesis: Buy the Dip Below $70

Despite the risks, Credo's irreplaceable role in AI infrastructure and margin resilience make it a long-term buy. The stock's recent pullbacks—driven by macro volatility or insider sales—present opportunities to accumulate shares at $65–70, below the consensus target.

Conclusion

Credo Technology is a rare blend of technical dominance and secular tailwinds in AI. While insider selling and regulatory clouds loom, they are outweighed by its monopoly on hyperscaler data-center technologies. For investors willing to look past short-term noise, CRDO offers a generational bet on the infrastructure underpinning the next decade of AI. Hold for the long game—buy dips below $70 with a horizon of 3+ years.