Credo Technology Plummets 7.22% Amid Legal Resolution and Earnings Anticipation: What’s Brewing in the Semiconductor Sector?

Summary
• Credo Technology (CRDO) trades at $122.3, down 7.22% from its previous close of $131.82, with an intraday low of $121.0 and high of $131.1999.
• The stock is set to report Q1 earnings on September 3, with Zacks consensus estimating $190 billion in revenue and 35 cents per share in earnings.
• Legal resolution with Amphenol and strategic partnerships with hyperscalers like Amazon and Microsoft have driven recent momentum.

Credo Technology’s sharp intraday decline reflects a mix of post-legal resolution volatility and anticipation for its Q1 earnings. The stock’s 7.22% drop, despite a recent 7.41% surge earlier in the week, underscores the sector’s sensitivity to macroeconomic and competitive pressures. With a dynamic P/E ratio of 405.39 and a forward P/S ratio of 26.02, investors are weighing growth potential against valuation risks.

Legal Resolution and Earnings Anticipation Drive Sharp Decline
Credo Technology’s intraday plunge follows the resolution of a patent dispute with Amphenol, which initially boosted investor sentiment. However, the market’s focus has shifted to the company’s upcoming Q1 earnings report, where the Zacks consensus expects $190 billion in revenue—a 218.2% year-over-year increase. The stock’s decline may also reflect concerns over customer concentration, with three hyperscalers accounting for over 10% of revenue in the last quarter. Additionally, elevated R&D expenses and competitive pressures from Broadcom and Marvell are weighing on sentiment.

Semiconductor Sector Mixed as Credo Outperforms Peers
The broader semiconductor sector remains fragmented, with Broadcom (AVGO) down 3.89% and Marvell (MRVL) up 17.8%. Credo’s 116.2% three-month gain outpaces the sector’s 15.5% return, driven by its leadership in active electrical cables (AECs) and optical DSPs. However, its high forward P/S ratio of 26.02 contrasts with Marvell’s 7.34 and Broadcom’s 19.85, signaling valuation risks. The sector’s exposure to AI infrastructure growth remains a key tailwind, but execution risks for Credo include customer concentration and rising operating expenses.

Options and ETFs for Navigating Credo’s Volatility
• MACD: 5.07 (above signal line 4.71), RSI: 59.86 (neutral), Bollinger Bands: 129.72 (upper), 116.76 (middle), 103.80 (lower).
• 200-day MA: $69.91 (well below current price), 30-day MA: $112.10 (support near $92.93).

Credo’s technicals suggest a short-term bearish bias amid overbought RSI and a breakdown below the 200-day MA. The stock is trading near its 52-week low of $24.08, but its long-term bullish trend remains intact. For options, CRDO20250905P120 (put) and CRDO20250905C122 (call) stand out:

• CRDO20250905P120 (Put):
- Strike: $120, Expiration: 2025-09-05, IV: 149.44% (high volatility), Delta: -0.4159 (moderate sensitivity), Theta: -0.3429 (rapid time decay), Gamma: 0.0144 (price sensitivity).
- Turnover: $136,858 (high liquidity).
- Payoff at 5% downside (ST = $116.19): $3.81 per contract. This put offers strong downside protection with a high IV premium.

• CRDO20250905C122 (Call):
- Strike: $122, Expiration: 2025-09-05, IV: 144.02% (moderate volatility), Delta: 0.5536 (moderate sensitivity), Theta: -0.9474 (rapid decay), Gamma: 0.0151 (high sensitivity).
- Turnover: $294,424 (high liquidity).
- Payoff at 5% downside (ST = $116.19): $0.00 (out of the money). This call is speculative but offers leverage if the stock rebounds.

Action: Aggressive bulls may consider CRDO20250905C122 into a bounce above $122.3, while cautious bears should target CRDO20250905P120 for a breakdown below $120.

Backtest Credo Technology Stock Performance
Below is the interactive back-test report. Key assumptions we auto-completed for you: • Entry rule – buy CRDO at the day’s close whenever the intraday low is 7 % or more beneath the open. • Exit rule – sell after a maximum holding period of 5 trading days (no other stop-loss / take-profit). These choices provide a concise, event-driven “rebound” test while keeping position management simple. Feel free to ask if you’d like different thresholds or holding periods.Open the module to explore full statistics, trade list, and equity curve.

Credo at a Crossroads: Earnings and Execution Risks to Watch
Credo Technology’s sharp intraday decline reflects a tug-of-war between its AI infrastructure growth story and execution risks like customer concentration and rising costs. While the stock’s technicals suggest a short-term bearish bias, its long-term bullish trend remains intact. Investors should monitor the September 3 earnings report for guidance on revenue and margin resilience. The sector leader, Broadcom (AVGO), is down 3.89%, highlighting broader semiconductor sector jitters. Watch for a breakdown below $120 or a rebound above $122.3 to dictate next steps.