While Palantir Technology has been one of the most talked-about AI winners this year, another AI player, Credo Technology, is growing faster and is up more year-to-date because of surging demand.
Unlike Palantir, which generates revenue by helping enterprises and governments securely develop AI applications, Credo’s success stems from being the market-share leading supplier of high-speed active electrical cables, or AECs, used to connect network infrastructure within data centers.
Demand is soaring because AECs serve as quiet, unsung AI workhorses, accelerating communication between high-end servers packed with power-hungry, ultra-fast AI chips, such as Nvidia‘s GPUs and TPUs made by Alphabet and Amazon.
As more data centers are built and hyperscalers seek to make their equipment more effective for AI training and inference, they’re increasingly buying more AECs from Credo Technology, sending revenue, profit, and its stock price higher.
Credo Technology’s sales are soaring as expanding data centers adopt its AEC interconnects.Shutterstock.
On Dec. 1, Credo Technology (CRDO) reported its latest quarterly sales and profit growth. The results were impressive, surpassing those of Palantir (and nearly every other major AI stock), and catapulting shares 10% higher, bringing its year-to-date stock return to an eye-popping 180%.
The company’s revenue skyrocketed 272% year over year to $268 million, resulting in earnings per share, or EPS, of 67 cents, 35% higher than Wall Street analysts were expecting.
For perspective, Palantir’s revenue grew 63% year-over-year, and its shares are up 126% in 2025.
Credo Technology’s growth was attributed to accelerating demand from hyperscalers for AECs. While the company doesn’t disclose exactly which hyperscalers it supplies, it lists four as major customers, each representing over 10% of its quarterly revenue. Altogether, those hyperscalers represent over 90% of Credo Technology’s sales.
Power Efficiency (Crucial for AI Clusters): AI data centers require a massive amount of electricity, and AECs consume up to 50% less power than active optical cables while still matching the required speed.
Distance and Performance: Copper cables are inexpensive and consume relatively little power, but only reliably transmit high-speed data over very short distances. AECs incorporate small semiconductors that clean signals, allowing them to be thinner, more flexible options for connecting servers and switches over longer distances necessary for connecting gear within a single rack or neighboring AI racks in clusters.
Reliability and Density: Traditional copper wires are too thick for modern server racks, and signals degrade when they’re bent. Meanwhile, optical cables use lasers that can experience momentary connection disruptions, known as link flaps, which can cause downtime. Since AECs are thinner, lighter, and flexible, they’re easier to work with and less likely to fail.
The company’s biggest customer, accounting for 42% of revenue, is most likely Amazon’s AWS. Microsoft’s Azure is likely its second-largest customer, given it’s been named in industry reports as a Credo partner. Meta Platforms is considered the third, while speculation is that either Google Cloud or Nvidia itself may be the newest member of the 10% club. During the quarter, management stated that orders for a fifth hyperscaler were beginning to ramp, presumably referring to Oracle, suggesting that Credo has captured market share at all major hyperscalers.
More AI Stocks:
It’s a good bet that Credo is working with all of them, given that they are among the biggest spenders on AI infrastructure as they build out capacity to serve cloud data customers.
Capital expenditures by hyperscalers are expected to exceed $405 billion in 2025, and spending is anticipated to increase further in 2026. Goldman Sachs targets capital expenditures (capex) at hyperscalers, including Oracle, to be $533 billion next year.
Given the spending frenzy, Credo Technology increased its revenue guidance during its latest earnings call.
Credo Technology delivered a bullish outlook for the current fiscal third quarter, guiding revenue to grow 27% sequentially to at least $335 million. If so, it would represent year-over-year growth of 148%.
Wall Street analysts currently expect that to translate into EPS of 79 cents, up from 25 cents last year. For the full year, they’ve increased their sales and EPS estimates to $1.19 billion and $2.81, respectively. For perspective, the full fiscal year EPS was $0.70 in fiscal 2025, so this represents a significant step-up in profitability.
The good times aren’t expected to end yet, either. Although growth is expected to slow to a more normalized pace, the capex spending plans of its big customers have analysts modeling fiscal 2027 revenue will climb to $1.63 billion, producing EPS of $3.64.
Bank of America was impressed enough by the report that it raised its stock price target on Credo Technology to $240 from $165, a 45% increase. Its analysts think that a roadmap to diversify its products supports a long-term runway to $10 per share of earnings.
Further out, Credo is working on new products to diversify revenue beyond AECs, including a pluggable optical solution that utilizes micro-LEDs as the light source. Credo Technology calls these products active LED cables, or ALCs, and says that they’ll deliver similar reliability and power consumption as an AEC, but will be even thinner and capable of connecting over longer distances.
“We believe the ALC TAM will ultimately be more than double the size of the AEC TAM,” said Brennan on the earnings call.
Altogether, Brennan says its total addressable market, or TAM, is positioned to expand to “$10 billion in the coming years, more than triple where we stood just 18 months ago.”
