The unglamorous work that makes the entire artificial intelligence boom possible is being done somewhere on a server-rack floor in a hyperscaler’s data center by a thin copper cable. It is not the type of material that appears on magazine covers. No keynote address on a stage in Las Vegas, no founder in a leather jacket. However, it’s the kind of information that contributes to the explanation of why Credo Technology Group, ticker CRDO, recently surpassed $218 per share and currently has a market capitalization of more than $40 billion.
The loud part of the session was on Friday. After reaching an all-time high of $218.95, the stock closed up nearly 13% before slightly declining in after-hours trading. The same shares were trading for about $59 a year ago. Experienced traders pause and re-read the screen when they have to do the math on a move like that. This chart is not typical.
The run is motivated by a long-simmering story. Credo manufactures high-speed connectivity products that are placed between the GPUs and racks in AI data centers. These products include chips, optical components, and a line of active electrical cables called ZeroFlap. The demand for quicker, more dependable, and less energy-intensive methods of transferring data over short distances has increased along with generative AI workloads. The limits of copper are being reached. Optical is assuming control. In the midst of that shift, Credo is remarkably well-positioned.
Numbers from the most recent quarter supported that claim. Revenue increased by more than 200 percent from the previous year to approximately $407 million. The gross margin was close to 67.8%, a number that software companies, not hardware ones, take great pride in. $157 million was cleared by net income. There is nearly no debt and over $1.2 billion in cash on the balance sheet. The financial profile has begun to resemble something completely different for a company that was still regarded as a niche connectivity player not too long ago.
Analysts have observed. Rothschild & Co. Redburn presented Credo as a leveraged play on AI infrastructure and began coverage with a Buy rating and a $206 target. The name was added to Jefferies’ Franchise Picks list, a move that usually attracts additional institutional funding. Strangely enough, the Street’s average twelve-month target is currently slightly below where the stock actually trades at $209. This is a peculiarity that arises when a chart outpaces the analysts attempting to model it.
However, there is a wrinkle that is worth mentioning. Chi Fung Cheng, the director and CTO, sold about 27,500 shares in late April, earning between $4.9 million and $5.2 million over two sessions. On the ascent, insider selling is not uncommon. Cheng continues to own over six million shares. However, cautious investors save this kind of information for later, particularly when a stock is priced for perfection.
It is also priced for excellence. Over 120 is the trailing P/E. The price-to-sales ratio is more than thirty. The June 1 earnings report has taken on the quality of an event because there is virtually no margin for error in numbers like that. Within days, there are two industry conferences. Each will provide Credo with an opportunity to either continue or break the story.
When you watch this, it’s difficult not to get a little nostalgic for Nvidia. Not because Nvidia owns Credo. By a wide margin, it isn’t. However, the pattern seems familiar: a supplier that was previously disregarded is now acknowledged as crucial, valuation is surpassing comfortable benchmarks, and a chorus of bulls maintain that the math is still valid because the demand curve is only now starting to bend. Naturally, the question of whether that holds is still unanswered.
