Credo Technology: The next big opportunity in AI?

Credo Technology may be the key to unlocking the next big opportunity in the rapidly expanding artificial intelligence (AI) sector, according to investment expert Abdullah Cheref. While the focus has been on graphics processing units (GPUs) in AI data centers, Cheref argues that the critical bottleneck is the interconnects that allow those massive GPUs to communicate efficiently.

That's where Credo Technology comes in - by building high-speed interconnects, the company is helping prevent the data centres from becoming bottlenecks. Credo has a strong grip on the advanced copper cables that are used in data centers, giving it pricing power. However, the company isn't resting on its laurels and is expanding its reach into optical cables through acquisitions like DustPhotonics.

Cheref's conviction in Credo stems from his analysis of where the money was going. He looked at hyperscaler capex and identified the physical bottlenecks that would benefit. Credo demonstrated strong growth, generating $479 million in revenue in Q1 FY27, a 115% year-over-year increase. The company boasts 67% gross margins, strong cash flow, and a limited debt profile.

The dominance of hyperscaler clients accounted for 84% of revenue, with the largest client responsible for 33% and the second for 28%. While the stock has experienced volatility, Cheref believes the valuation still leaves room for further upside if the execution continues. The recent after-hours drop to $185.72 may have been a reaction to a record quarter and raised guide, but the physical demand for Credo's infrastructure remains strong.

For those looking to capitalize on the AI boom, Credo Technology could be the next big opportunity in the rapidly growing industry.