By Tae Kim

A major Wall Street bank now believes Credo is a great stock to ride the artificial-intelligence wave.

On Friday, J.P. Morgan analyst Joseph Cardoso initiated coverage on Credo Technology Group Holding with an Overweight rating and established a $165 stock target for the shares.

Credo is a leader in high-speed data connections used in AI data centers. The company offers a variety of products, including optical devices and data networking chips, but its active electrical cables, or AECs, are the largest part of its business.

The company has "strong and expanding relationships across the largest cloud service providers," Cardoso writes. "This positions Credo well to benefit from growing demand for AECs, placing the company on the trajectory for strong revenue growth and expanding margins in the coming years."

In early trading Friday, Credo stock was up 2.1% to $139.39. The shares have surged 107% this year.

Credo invented the AEC, which is a copper-based cable used to attach AI servers to networking switches. AECs are more reliable and consume less power than optical cables and can be used for longer distances than traditional passive copper cables.

J.P. Morgan predicts Credo will be able to grow its revenue at more than 50% a year and its earnings at more than 70% a year through 2028. Customers include Microsoft, Amazon.com, Elon Musk's xAI, and Meta Platforms, he said. Cardoso also said Oracle and Alphabet's Google are potential future customers.

"Given our expectation for solid improvement in FCF [free cash flow] generation and an already healthy balance sheet, we would not rule out a greater appetite for capital allocation, which would represent upside to our outlook," the analyst wrote.

Last month, Credo shares rose after the company reported better-than-expected earnings results, citing strong demand from large technology companies.

Write to Tae Kim at tae.kim@barrons.com

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October 17, 2025 11:39 ET (15:39 GMT)

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