Credo Technology started with overweight at Barclays, expects 'robust' AI growth
tomazl/E+ via Getty Images
Investment firm Barclays initiated coverage on Credo Technology (NASDAQ:CRDO) with an overweight rating, noting it should see "robust" growth from artificial intelligence and the transition to 400G.
Blayne Curtis, who also put an $18 price target on Credo Technology (CRDO), said the hyperscale server market should grow at more than 6% on a compound annual growth rate through 2026 and AEC adoption is expected to move from roughly 10% today to roughly 55% in 2026. 
"We see a [total addressable market] of $1.24B in 2026, driven by assigning $180 unit price and 1 connection to all servers in the hyperscale market," Curtis wrote in an investor note. "In reality, material adoption of the [active electrical cable] product comes with the move to 100G per lane in servers where optics are too expensive and DACs are too bulky/not performant enough. We are believers in AEC technology for short reach connections at 100G per lane and see the market growing at a 79% CAGR through 2026."
Curtis added that Credo (CRDO) is the first company with a commercially available active electrical cable product and its competitors, such as Marvell (MRVL) and Astera Labs, are component suppliers that have different economics and different levels of support, compared to Credo's integrated solution.
Curtis also said that Credo (CRDO) has had one "material" win with Microsoft (MSFT), but it may be working with another company - believed to be Amazon - in artificial intelligence, servers and switches. 
"Expect meaningful revenue there starting in [fiscal 2024], with discussion around X cable connecting 2 NICs to 2 TORs," Curtis added. "This bridges the gap to the transition towards 400G (4x100G/lane) in late â24."
In addition, Curtis said that "mass adoption" of active electrical cable is likely not far out, with expectations that it will happen in 2024 or 2025. He also said the company's IP story should "get more credit" and its exposure to artificial intelligence is a "plus."

More on Credo Technology

Credo Technology: Near-Term Growth Uncertainty Is Not A Good Thing
Credo Technology Group Holding Ltd Q1 2024 Earnings Call Transcript
Credo: Super Growth On HiWire Adoption
Credo Technology Non-GAAP EPS of -$0.03 in-line, revenue of $35.1M beats by $0.83M
Seeking Alphaâs Quant Rating on Credo Technology