By Contributor,Thomas Fuller,Trefis Team

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CANADA – 2025/09/04: In this photo illustration, the Credo Technology logo is seen displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images

Credo Technology stock (NASDAQ:CRDO) surged nearly 10% on Wednesday and has more than doubled over the past quarter, elevating its market capitalization to approximately $28 billion. The firm offers high-speed connectivity solutions for Ethernet and AI infrastructure, including integrated circuits, active electrical cables, and IP licensing. This recent stock surge follows a spectacular first-quarter report, which ended on August 2, 2025, showing revenues soaring 274% year-over-year to $223.1 million. Credo also introduced its Bluebird Digital Signal Processor, a low-power, high-efficiency solution designed to reduce latency and power consumption in GPU communications – a known bottleneck for scaling next-generation AI workloads. The company also highlighted significant business achievements with hyperscalers, who play a crucial role in the AI rollout. So, is Credo stock still a worthwhile investment after the substantial rally, or is it too late?

Increasing Engagement with Tech Giants

The AI narrative is pivotal to Credo’s expansion. The Bluebird DSP directly addresses power and efficiency issues in optical transceivers, essential for data centers powering generative AI. In Q1 FY’26, three hyperscalers each accounted for over 10% of revenue, with a fourth beginning to increase its collaboration with the company. Management anticipates these four will remain primary contributors through fiscal 2026, while two additional hyperscalers are expected to join. This provides high visibility into future growth, with the company forecasting approximately 120% revenue growth in FY26, significantly surpassing earlier estimates of 85%.

For context, Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) reported they could collectively invest $364 billion in capital expenditures for their respective fiscal years. If realized, this would establish Credo as a preferred supplier of AI infrastructure components during a time when cloud and chip industry leaders are rushing to expand their GPU clusters. This positions Credo as more than merely a chip supplier; it is emerging as a crucial enabler of hyperscaler AI developments.

Is The Stock Worth Buying?

Naturally, investors must consider valuation. Credo is trading at a price-to-sales ratio of 47.3x and a price-to-earnings multiple of 227x – substantial premiums compared to the S&P 500’s 3.3x and 24.2x, respectively. Yet, these elevated multiples indicate more than just hype. Revenues have increased by 176% in the past year to $600 million, with quarterly growth surpassing the S&P 500 by over 40 times. Profitability is also strong, with a 20.8% net margin compared to 12.6% for the broader index, and the balance sheet remains robust, with only $16 million in debt against $480 million in cash. Therefore, overall, Credo is not a speculative cash-burning AI venture, but a profitable, cash-generating growth enterprise with minimal leverage.

So, is it too late to invest? That ultimately depends on your risk tolerance. For investors focused on value, Credo certainly appears costly, and its history of dramatic fluctuations – including a 62% drop during the inflation crisis of 2022 – underscores the risks involved. However, for growth-oriented investors, the narrative is significantly more enticing. Credo is addressing one of the largest bottlenecks in AI data centers — power and latency — while strengthening its partnerships with hyperscalers who are central to the AI expansion. If adoption continues at the current rate, the current high multiples may well be justified by the company’s exceptional growth potential. In this regard, Credo stands out as a high-risk but potentially high-reward investment in the infrastructure sector of the AI revolution.

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