Why Credo Technology Group Rocketed Nearly 50% Today

Shares of data center cable company Credo Technology (NASDAQ: CRDO) rocketed on Tuesday, with shares up 47.3% as of 1:11 p.m. ET.

The company reported earnings last night that not only beat analyst estimates but also delivered blowout guidance, suggesting Credo has emerged as a new artificial intelligence (AI) winner.

An inflection point in AI interconnect

Credo makes a unique cable product called an active electrical cable (AEC), which connects data center servers to networking switches. The company claims its AECs take up 75% less space than Direct Attach Copper (DAC) cables and offer 50% more power efficiency versus active optical cable (AOC) alternatives.

As power and space are becoming scarce commodities in power-hungry AI data centers, Credo's proprietary technology seems to be finding favor with large AI customers. In its fiscal third quarter, Credo delivered 63.6% revenue growth to $72.0 million, beating estimates by $5.2 million, while adjusted (non-GAAP) earnings per share came in at $0.07, beating estimates by $0.02.

But the biggest story with Credo was its third quarter revenue guidance for between $115.0 million and $125.0 million. That's obviously a massive 67% quarter-over-quarter jump, suggesting perhaps a tipping point in demand for the technology.

CEO Bill Brennan confirmed, "For the past few quarters, we have anticipated an inflection point in our revenues during the second half of fiscal 2025. I am pleased to share that this turning point has arrived, and we are experiencing even greater demand than initially projected, driven by AI deployments and deepening customer relationships."

The hot new AI stock on the block

Investors have been clamoring for new artificial intelligence winners to buy, and it appears Credo just emerged as that today in a big way. However, Credo's $11.8 billion market cap does look rather high after the surge, given its mere $500 million revenue run rate based on the third quarter outlook.

Should you invest $1,000 in Credo Technology Group right now?

Before you buy stock in Credo Technology Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Credo Technology Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $849,539!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of December 2, 2024

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.