Up 2x Last Quarter, Is It Too Late To Buy Credo Stock?

Credo Technology stock (NASDAQ:CRDO) jumped nearly 10% on Wednesday and has more than doubled over the past quarter alone, pushing its market cap to roughly $28 billion. The company provides high-speed connectivity solutions for Ethernet and AI infrastructure, spanning integrated circuits, active electrical cables and IP licensing. The latest surge in the stock follows a blockbuster first-quarter report, ended August 2, 2025, with revenues soaring 274% year-over-year to $223.1 million. Credo also unveiled its Bluebird Digital Signal Processor, a low-power, high-performance solution designed to cut latency and power consumption in GPU communications – seen as a bottleneck in scaling next-generation AI workloads. The company also talked up significant business wins with hyperscalers, who have been central to the AI rollout. So is Credo stock still worth buying post the big rally, or is it too late?

Image by J S from Pixabay

Growing Exposure To Tech Titans

The AI narrative is central to Credo’s growth. Bluebird DSP directly addresses power and efficiency challenges in optical transceivers, which are vital for the data centers powering generative AI. In Q1 FY’26, three hyperscalers each contributed over 10% of revenue, with a fourth beginning to ramp up its business with the company. Management expects these four to remain major contributors through fiscal 2026, while two more hyperscalers are set to join. This creates high visibility into future growth, with the company guiding for roughly 120% revenue expansion in FY26, well above earlier projections of 85%.

For perspective, Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) indicated that they could spend a cumulative $364 billion in capex for their respective fiscal years. If achieved, this would cement Credo’s status as a go-to provider of AI infrastructure components at a time when cloud and chip giants are racing to expand their GPU clusters. This positions Credo as more than just a chip supplier; it is emerging as a critical enabler of hyperscaler AI build outs.

Is The Stock A Buy?

Of course, investors cannot ignore valuation. Credo trades at a price-to-sales ratio of 47.3x and a price-to-earnings multiple of 227x – considerable premiums to the S&P 500’s 3.3x and 24.2x respectively. Still, these lofty multiples reflect more than hype. Revenues have surged 176% in the last year to $600 million, with quarterly growth outpacing the S&P 500 by over 40x. Profitability is healthy too, with a 20.8% net margin versus 12.6% for the broader index, and the balance sheet is pretty strong, with only $16 million in debt against $480 million in cash. So overall, Credo is not a speculative cash-burning AI play, but a profitable, cash-generating growth company with minimal leverage.

So, is it too late to buy? That comes down to your risk tolerance. For value-focused investors, Credo certainly looks expensive, and its history of sharp swings  – including a 62% drawdown during 2022’s inflation shock – highlights the risks. But for growth-oriented investors, the story is much more compelling. Credo is tackling one of the biggest bottlenecks in AI data centers- power and latency – while deepening its relationships with hyperscalers at the center of the AI build out. If adoption continues at the current pace, today’s rich multiples may be justified by the company’s outsized growth prospects. In that sense, Credo stands out as a high-risk but potentially high-reward bet on the infrastructure layer of the AI revolution.

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