Credo Technology Group: Insider Selling Versus Bullish Analysts—A Tale of Contradictions

The stock of Credo Technology Group Holding Ltd (CRDO) has become a microcosm of Wall Street's current dilemma: Should investors trust the optimistic forecasts of analysts, or the caution signaled by massive insider selling? With shares trading at $61.96 as of June 19, 2025—down 33% from their peak of $93.22 in late June—the conflict between insider actions and analyst ratings is starkly on display.

The Insider Sell-Off: A Strategic Exit or Cause for Concern?

Credo's leadership has been aggressively reducing their stakes in recent months. Between January and June 2025, insiders unloaded over 29 million shares, with transactions totaling well over $2 billion. The most notable seller is Lip-Bu Tan, a director and co-founder, who sold 26 million shares alone, primarily through affiliated entities like Walden Technology Ventures. His June 25 sale of 8.4 million shares at $90–$93—near the stock's recent highs—generated $8.4 million in proceeds. While Tan retains 694,000 shares indirectly, the sheer scale of his sales raises questions about his confidence in Credo's prospects.

Chief Technology Officer Chi Fung Cheng, who holds 7.4 million shares via a family trust, has also sold millions of shares since 2024, often through pre-established Rule 10b5-1 trading plans. These plans, designed to avoid accusations of insider trading, suggest systematic portfolio diversification. Yet the cumulative effect of such sales—alongside similar activity by the COO and CFO—has fueled investor skepticism.

Analysts' Bullish Case: Growth at a Premium

Despite the insider exodus, analysts remain optimistic. As of June 2025, 11 analysts rated CRDO a “Buy” or equivalent, with a median price target of $70, and a high of $84 from Goldman Sachs. Their bullishness hinges on Credo's role in the $250 billion data infrastructure market, driven by AI, high-performance computing, and hyperscale cloud providers like AWS.

Credo's 63.6% gross margins and 154% YoY revenue growth in 2024 underscore its technical prowess in energy-efficient semiconductors and optical interconnects. Analysts argue that its patented chiplet technology and partnerships with major cloud providers justify its premium valuation—1,990x P/E and 31x Price/Sales—despite these metrics being far above industry averages.

The Contradiction: Why the Disconnect?

The divergence between insiders and analysts stems from differing time horizons and incentives:
1. Insiders' Pragmatism: Executives may be monetizing gains after a 300% rally from 2022 lows, diversifying wealth, or hedging against execution risks. Credo's dependency on a few large customers and the cyclical nature of tech spending could justify caution.
2. Analysts' Optimism: Wall Street focuses on long-term secular trends in AI and data centers, where Credo's niche technology could see 20%+ annual revenue growth. The stock's current price-to-sales ratio, while high, is comparable to peers like Marvell Technology (MRVL) or Inphi Corporation (IPHI) during growth phases.

Investment Implications: Proceed with Caution

While Credo's fundamentals are compelling, investors must weigh three risks:
- Valuation Risk: A P/E of 1,990x implies perfection. Any misstep in product development or customer relationships could trigger a sharp sell-off.
- Insider Signals: The $2 billion in insider sales—particularly at prices above $80—suggest that leadership views current valuations as rich.
- Market Cyclicality: The tech sector's boom-and-bust cycles could pressure margins if demand for cloud infrastructure slows.

Conclusion: A Speculative Play for Growth Investors

Credo Technology Group is a high-risk, high-reward bet. Its technology is undeniably innovative, and analysts' bullishness is grounded in real opportunities in AI and data infrastructure. However, the massive insider selling and sky-high valuation demand a skeptical eye.

Investors should consider:
- Buying on dips below $55, if fundamentals hold.
- Avoiding the stock at current prices unless you're willing to bet on a multiyear growth story.
- Monitoring insider activity: Further selling—especially by Tan or Cheng—could signal deeper concerns.

In the end, Credo's story is one of future potential versus present overvaluation. For now, the stock remains a gamble best suited for those with a long time horizon and a tolerance for volatility.