Credo Technology (CRDO): The Unsung Hero of AI's Data Infrastructure Surge

The race to build the next generation of AI infrastructure is reshaping the semiconductor industry, and one underappreciated player stands at the intersection of this transformation: Credo Technology (CRDO). While the spotlight shines on headline names like NVIDIA (NVDA), Credo's silicon photonics and high-speed connectivity solutions are quietly enabling the scalability of AI hardware. This hidden gem offers investors a leveraged play on the AI boom—without the crowdedness of its more famous peers. Here's why CRDO deserves a closer look.

A Critical Role in the AI Supply Chain

Credo's value proposition is simple but vital: it provides the “connective tissue” for AI servers. Its Active Electrical Cables (AECs) and optical digital signal processors (DSPs) ensure data flows seamlessly between GPUs, CPUs, and storage systems in hyperscale data centers. In a world where AI models demand exabytes of data per second, Credo's silicon photonics—like its 800 gig transceiver DSP and ultra-low-power 100 gig per lane optical DSPs—solve a foundational problem: speed without energy waste.

Unlike NVDA, which builds the GPUs that crunch AI algorithms, Credo operates one step removed but no less crucially. Its components are the unsung heroes that make NVDA's GPUs function at scale. This positioning gives CRDO a multiplier effect: every dollar spent on AI hardware by cloud giants like Amazon (AWS) or Microsoft (MSFT) implicitly funds Credo's growth.

Outperforming Financials, Underappreciated Valuation

Credo's Q1 FY2025 results underscore its momentum. Revenue surged 70% year-over-year to $59.7 million, driven by hyperscale data center demand. Non-GAAP net income hit $7.0 million, and gross margins remained robust at 62.9%, reflecting pricing power. The company's cash position of $398.6 million provides ample runway to capitalize on its long-term target of exceeding $800 million in FY2026 revenue—an 85% increase from FY2025.

Yet despite this growth, CRDO's valuation remains a bargain relative to its peers. With a forward P/S ratio of 18.03—half that of NVDA's 40x multiple—and a P/E of 245x (lower than many AI-focused semiconductor firms), investors are underpaying for a company at the heart of a $100 billion+ AI hardware market.

Why CRDO, Not NVDA?

NVDA's stock has become the poster child of the AI revolution, but its meteoric rise has made it both crowded and vulnerable to valuation correction. Credo, by contrast, offers three key advantages:

1. Niche Differentiation: Credo's silicon photonics are irreplaceable in high-speed data transmission. Competitors like Broadcom (AVGO) and Marvell (MRVL) lack its vertical integration—Credo owns SerDes IP, Retimer ICs, and system design, creating a defensible moat.
2. Lower Risk of Disruption: While NVDA faces AI-specific headwinds (e.g., software-driven models reducing GPU dependency), Credo's demand is tied to physical infrastructure needs that will persist regardless of software trends.
3. Underpenetrated Market: Credo's current market share in silicon photonics is small but growing rapidly. Its recent design wins—such as the 5nm-based optical DSP—position it to capture a larger slice of a market expected to triple by 2030.

Risks and Mitigations

Credo isn't without challenges. Its reliance on AWS (61% of Q4 FY2025 revenue) poses concentration risk, and insider sales in June 2025 raised eyebrows. However, the company's diversified customer pipeline—including partnerships with xAI and new hyperscalers—suggests this risk is manageable. Meanwhile, its cash reserves and non-GAAP profitability indicate a strong balance sheet to navigate volatility.

The Investment Case: A Smart, Under-the-Radar Play

For investors seeking exposure to AI's chip demands without overpaying, Credo is a compelling alternative to crowded names like NVDA. Its valuation is still reasonable relative to its growth trajectory, and its role as a system-level enabler ensures it benefits from every dollar spent on AI hardware.

Action Items:
- Buy: For investors with a 12–18 month horizon, CRDO offers asymmetric upside. A move toward its $800 million revenue target could push shares above $50 (up from ~$35 today). Historical performance shows that while short-term trading strategies may underwhelm——the company's long-term fundamentals remain robust. Over the tested period, such a strategy delivered an overall return of -27.12%, with a maximum drawdown of -57.25%, underscoring the need for a patient, hold-oriented approach.
- Watch: Monitor Q2 guidance (projected $65–68 million revenue) and customer diversification progress. A sustained beat on estimates would validate its growth story.
- Avoid: Hold off if valuation multiples expand further. A P/S above 20x may signal overvaluation.

Conclusion

Credo Technology is the unsung hero of the AI infrastructure boom—a company whose innovations quietly underpin the next generation of data center scalability. While the market fixates on headline players like NVDA, CRDO's strategic position, robust financials, and underappreciated valuation make it a smarter, less crowded bet. In an era where speed and efficiency are paramount, Credo is proving that even the unsung can shine.

Data as of June 2025. Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor before making investment decisions.