Can Credo Technology Still Deliver After Its Impressive 54.5% Rally Over Six Months?

When a stock climbs 54.5% in half a year, the question every investor asks is the same: Is it too late to buy? For Credo Technology Group Holding Ltd (CRDO), the answer might surprise you.

The AI Infrastructure Tailwind Powering CRDO’s Surge

The chip and semiconductor sectors have grown by 26.3% and 19.1% respectively over the same period, yet CRDO has dramatically outpaced both. The driver? A genuine shift in how data centers are being built for artificial intelligence workloads. As GPU clusters scale toward million-unit configurations, the infrastructure connecting them becomes just as critical as the computing power itself.

This is where Credo steps in. The company’s Active Electrical Cables (AECs)—cables that combine electrical and intelligence layers—have become foundational to next-generation AI data center architecture. What makes them special? They deliver up to 1,000 times greater reliability compared to traditional optical solutions while consuming 50% less power. For hyperscalers managing massive compute clusters, this translates directly to cost savings and operational resilience.

From AECs to Multi-Billion Dollar Platforms

The growth story extends well beyond cables. Credo’s IC portfolio—including retimers and optical digital signal processors—continues gaining traction. More significantly, the company has outlined three additional product pillars:

• Zero-flap optics for ultra-high-speed connectivity
• Active LED cables for emerging applications
• OmniConnect gearboxes (marketed as Weaver) for traffic management

Combined with existing AEC and IC solutions, management estimates the total addressable market now exceeds $10 billion—more than tripling the company’s reach from just 18 months ago.

Execution Where It Matters: The Numbers

Last quarter’s results painted a compelling picture. Four hyperscalers each accounted for more than 10% of revenue, signaling strong, concentrated demand. But here’s the real news: a fifth hyperscaler recently began contributing initial revenue, and a sixth is progressing through design phases.

On the profitability front, CRDO’s non-GAAP gross margin expanded by 410 basis points to 67.7%—above management’s own guidance. Operating income jumped from $8.3 million year-over-year to $124.1 million. For fiscal 2026, the company projects net income to more than quadruple, with revenue growth exceeding 170%.

The balance sheet? Fortress-like. As of November 1, 2025, CRDO held $813.6 million in cash and short-term investments, up sharply from $479.6 million just three months prior. This financial flexibility allows the company to invest aggressively in R&D and strategic acquisitions without diluting shareholders.

Looking ahead, management guided for $335 million to $345 million in revenue for Q3—representing 27% sequential growth at the midpoint.

Valuation: Premium, but Justified?

CRDO trades at a forward 12-month price-to-sales ratio of 17.22, compared to the semiconductor sector average of 8.58. That’s roughly double. For context:

• Broadcom (AVGO): 16.34x P/S, up 26.8% over six months
• Marvell Technology (MRVL): 7.68x P/S, up 24.9% over six months
• Astera Labs (ALAB): 25.96x P/S, up 100.4% over six months

CRDO’s valuation premium reflects its steeper growth trajectory, but the question remains: Is there still upside, or has the market already priced in next three to five years of success?

The Risks You Can’t Ignore

No bull case exists without bears. Higher operating expenses, intensifying competition from Broadcom, Marvell, and newer entrants like Astera Labs, and macroeconomic headwinds could slow Credo’s momentum. Additionally, concentration risk—with four customers representing 40%+ of revenue—means a single customer loss could create volatility. The AI cycle itself, while powerful today, could moderate or shift unexpectedly.

The Verdict: Still a Buy for Patient Investors

Despite the sharp run-up, CRDO remains compelling for investors with a multi-year horizon. The company’s positioning at the core of AI infrastructure buildout, combined with expanding margins, accelerating revenue visibility, and fortress balance sheet, supports continued outperformance.

The stock’s premium valuation is justified by genuine execution and a runway that likely extends well beyond current consensus. Yes, near-term volatility is likely, but the long-term opportunity appears intact.

CRDO currently carries a Zacks Rank of #1 (Strong Buy), reflecting analyst confidence in its trajectory. For those willing to ride out quarterly gyrations, the risk-reward still favors the bulls.