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Computer servers in data centers equipped with AI chips need connections to network infrastructure. That's where Credo Technology Group Holding Ltd. (CRDO) comes in. Credo's products speed up communications among racks of computer servers and storage devices packed into data centers, highlights John Gardner, founder and principal of Blackhawk Wealth Advisors’ Market Insights.

Credo is seeing fast growth and profit expansion in its active electrical cables (AECs). These cables connect computer servers to networking equipment such as switches or routers. AECs own the sweet spot solution between cheaper copper direct attached cables (DACs) and pricier active optical cables (AOCs).

The AEC chip market will boom to more than $1 billion annually by 2028, up from $68 million in 2023, industry research indicates. The company is experiencing even greater demand than initially projected, driven by AI deployments and deepening customer relationships.

Credo's biggest customer for AECs has been Microsoft Corp. (MSFT). Its AECs also connect Nvidia Corp. (NVDA)-based servers to networks as well as servers using other AI chips, such as those from Advanced Micro Devices Inc. (AMD). In addition, Credo recently announced Amazon.com Inc. (AMZN) and Tesla Inc. (TSLA) as major customers.

Credo is significantly expanding AEC capacity into 2025 as the start of a multi-year adoption cycle for its AEC product. Aside from AECs, Credo makes optical digital signal processors, known as DSPs, and other networking products. It is well positioned to benefit from the explosive growth of data traffic inside the data center that now requires exponentially faster network interconnection speeds to service applications.

Credo's recent quarterly earnings report and strong guidance were bullish. Shares of Credo's stock are timely, with best-in-group technical and fundamental indicators. The stock ranks #1 overall in the Internet-Network Solutions industry group. Institutional accumulation has jumped, and there are now over 500 mutual fund owners – up from 194 in December 2022.

As Credo has gotten more credit for being a leading supplier of components and power for AI data centers, its stock price has been on the rise. It more than doubled in 2024. But AI-driven tailwinds are likely to boost the stock even higher.

About the Author

John Gardner is the founder and principal of Blackhawk Wealth Advisors (BWA). In his 37 years as an investment advisor, Mr. Gardner has gained valuable investment insight, experience, and knowledge through working with leading Wall Street wealth management companies before starting BWA.

As both a Certified Financial Planner (CFPand a Certified Portolio Manager (CPM), he seeks to ensure client's investment portfolios are consistent with their overall estate plan.

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