1 Stock That Could Outperform as Artificial Intelligence Adoption Grows

OpenAI's ChatGPT reached 1 million users in the first week of its release and now processes more than 2.5 billion prompts per day. It's an early case study of how quickly artificial intelligence (AI) can scale and reach new people. Even wider adoption is likely as ChatGPT is still in its early innings.

AI companies in general are still in their early innings too, which points to companies like Credo Technology Group (NASDAQ: CRDO) outperforming in 2026 and beyond as the buildout continues. Credo produces high-speed data connectivity solutions that are part of the AI data center infrastructure that is receiving so much attention lately.

With its $27 billion market cap, Credo is a relatively smaller AI stock compared to megacaps, but investors have been noticing the opportunity. Credo's stock price has more than doubled over the past year and is up by more than 1,250% over the past five years.

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AI training and inference clusters need Credo

Credo's high-speed data connectivity solutions are critical for AI training and inference clusters. Without this behind-the-scenes technology, the AI boom would quickly fade.

While Credo isn't the only company in the industry, it is gaining market share. The company's revenue more than tripled year over year in the second quarter of fiscal 2026, and that included a 20.2% sequential jump. The midpoint of Credo's third-quarter revenue guidance comes to $340 million, which implies a 152% growth rate. The midpoint also implies 27% sequential growth.

Big tech companies have already committed to increasing their AI spending. Some of that money will flow into Credo, and optimistic guidance already suggests that growth is accelerating.

Credo stock is down by 17%, making it look more promising

Even the best growth stocks endure volatility, and for AI stocks, the drops are usually more severe. That's part of the reason why Credo stock is down by roughly 17% from its all-time high in December 2025 despite establishing itself as a key player in the AI boom.

Some investors may be worried about the valuation. The stock trades at a 130 P/E ratio, but its 42 forward P/E ratio shows how much progress it has made with profits. Although revenue growth has been superb, its net income is growing even faster.

Credo looks well-positioned to continue expanding its margins while being projected to deliver 27% sequential growth at the Q3 midpoint. The company's net profit margin jumped from 20% to over 30% in just a few quarters. This trend can make the stock compelling despite its 130 P/E ratio.

It's important to view any AI stock through the lens of multiple years instead of a few months. Credo looks like a long-term winner that can crush the S&P 500 over the next 10 years. It already has a history of rewarding long-term investors, and it's still not too late to get in on the action.

Marc Guberti has 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.