Credo Technology Stock Is Soaring. Is This a Top AI Play for 2026?

Credo Technology (NASDAQ: CRDO), a provider of high-speed connectivity solutions for data centers, has generated massive gains since its initial public offering (IPO). It went public at $10 per share on Jan. 26, 2022, opened at $12.10 on the first day, but now trades at about $177.

The stock skyrocketed as it dazzled the bulls with its explosive growth and direct exposure to the booming artificial intelligence (AI) market. But it usually isn't mentioned in the same breath as other top AI stocks like Nvidia and Palantir Technologies.

So can Credo, which already rallied more than 150% over the past 12 months, maintain its momentum in 2026 as the AI market expands? Let's review its business model and near-term catalysts to find out.

Image source: Getty Images.

What does Credo do?

Credo sells active electrical cables (AECs), which connect switches, servers, and other hardware across data centers; serializer/deserializer (SerDes) chiplets, which convert serial and parallel data across high-bandwidth connections; and other types of integrated circuits and digital signal processor chips for optical and electrical connections.

Its high-speed connectivity products are essentially the "plumbing fixtures" of modern data centers, which makes them essential purchases for companies that want to upgrade their infrastructure to support the latest cloud and AI applications. It also licenses its IP to other companies.

Credo says its products "ease system bandwidth bottlenecks" in data centers. Its new 224G PAM4 SerDes chiplets, which were built on Taiwan Semiconductor Manufacturing's advanced N3 (3nm) node, help data centers achieve port connectivity speeds of 1.6 Tbps -- a crucial threshold for supporting next-gen AI clusters and hyperscale data centers.

How fast is Credo growing?

In fiscal 2025 (ended this past May), Credo generated 94% of its revenue from its product sales. The remaining 6% came from its engineering services and IP licensing segment. Its growth slowed down in fiscal 2024 as it geared up for the launches of its faster products (including the 224G PAM4) and generated lower IP licensing revenues.

But in fiscal 2025, its growth accelerated again and its adjusted margins expanded to record highs. That acceleration was driven by the explosive growth of the AI market, which drove its hyperscale data center customers to ramp up their purchases of its AECs, SerDes chiplets, and other chips to increase their bandwidth.

Data source: Credo Technology. *Not disclosed. FY=fiscal year.

In the first half of fiscal 2026, Credo's revenue surged 273% year over year to $491 million, its adjusted gross margin expanded 430 basis points to 67.6%, and its adjusted operating margin jumped from 7.9% to 44.9%. Adjusted net income rose nearly ninefold to $226 million, and it stayed profitable on a generally accepted accounting principles (GAAP) basis. For the third quarter, Credo expects its revenue to rise 148%-156% year over year as its adjusted gross margin rises from 63.8% to 64%-66%.

For fiscal 2026, analysts expect its revenue and adjusted EPS to surge 173% and 301%, respectively. For fiscal 2027, analysts expect its revenue and adjusted EPS to rise another 37% and 30%, respectively, as the AI boom continues. It's also expected to sell more high-speed optical connectivity chips, retimers (which recover, recondition, and retransmit signals), active LED cables, and gearboxes to reduce its long-term dependence on its core AEC hardware business.

Will Credo remain a top AI play for 2026 and beyond?

Credo established an early-mover advantage in the AI infrastructure space, but it could face tougher competition from more diversified chipmakers like Broadcom and Marvell Technology over the next few years. Customer concentration is another major issue. Four of its hyperscale customers each accounted for more than 10% of its revenue in the second quarter of fiscal 2026, so losing any of those customers could abruptly throttle its growth.

Credo should continue to expand, but investors shouldn't expect it to keep growing by triple digits. Its stock certainly isn't cheap at 93 times its forward adjusted earnings, but it also isn't trading at meme stock levels yet. So if you expect the AI market to keep expanding in 2026 and beyond, it might be a good idea to accumulate a few shares of Credo today. It will remain volatile, but its long-term tailwinds are too strong to ignore.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.