Credo Technology Group's AEC market growth, driven by cloud partnerships, supports a 217% stock price increase, warranting a valuation assessment. AECs offer power efficiency and cost benefits over alternatives, with a projected 78% CAGR, benefiting Credo amid rising cloud AI infrastructure investments. Despite competition from Astera Labs and Marvell, Credo's strong growth and key customer relationships position it well in the expanding AEC market.

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Credo is a leading developer of Active Electrical Cables (“AECs”) which are advanced cables that are critical in high-speed data transmission making it well positioned in the AI revolution. The company has certain competitive advantages due to its SerDes technology. This can be seen in its high gross margins. Key risk facing Credo right now: most of its revenues come from a single client hyperscaler, resulting in concentration risk.

Credo's AECs are essential in AI data centers, driving 154% YoY revenue growth. A first-mover advantage and strong demand position it for continued outperformance. Trading at fair value near its 50-week MA, with an RSI of 43, CRDO stock offers an optimal entry. Profitability ramp will lower its P/E, supporting a $90 price target. High customer concentration, lack of long-term supply contracts, and rising competition pose risks. Despite this, its growth outlook justifies a sub-2% high-alpha portfolio allocation.

The recent tech sell-off hammered Credo investors, but it could have bottomed out last week. Credo's reliance on hyperscalers like AWS is a deep concern, but management's efforts to diversify revenue and projected 50% YoY growth for FY2026 offer optimism. AI infra spending isn't expected to collapse, although growth could slow. But CRDO's valuation has likely considered these risks.

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Credo Technology reported strong Q3 earnings, beating expectations and raising Q4 revenue guidance, driven by robust AEC product shipments and expanding hyperscaler customer base. Despite 86% of Q3 revenues coming from Amazon's AWS, this concentration risk is mitigated by AWS's investment in Credo and potential diversification of suppliers. Credo remains undervalued with a forward valuation of 37x FY26 EBITDA appealing, given its entry into new markets and strong balance sheet.

CRDO's double digits correction has been well warranted, as the AI bubble burst thanks to DeepSeek, intensified tariff war, and decelerating infrastructure chip sales. The selloff has already triggered an improved upside potential as the connectivity company delivers triple digits topline growth, richer profit margins, and growing hyperscaler partnerships. CRDO's long-term data center related prospects remain extremely bright, as guided by numerous hyperscalers, NVDA, and TSM in the recent earning calls.

Shares of Credo Technology declined this week despite the company reporting strong fiscal Q3 2025 results and providing guidance for Q4 2025 that was well above the Street consensus. Negative industry sentiment and the recent correction of high-growth tech stocks are the likely culprits, and Credo's valuation is also asking for a lot of growth. Credo is delivering exceptional growth and exceeding expectations, and it is a stock worth watching.

Credo Technology's stock is severely undervalued, trading at a 0.52x adjusted PEG ratio, significantly lower than the industry average, despite strong revenue and EPS growth. The company reported a substantial revenue increase of 87% QoQ and 154% YoY in Q3, beating consensus estimates by 12.17%, and EPS by 36.53%. Credo's growth is driven by high demand for faster, energy-efficient connectivity and AI infrastructure, with promising future revenue diversification reducing customer concentration risks.