Credo Technology has received a major vote of confidence from Goldman Sachs, which initiated coverage with a buy rating and a $165 price target, representing approximately 27% upside potential. The endorsement comes after the AI infrastructure stock surged 180% in 2025, driven by explosive data center demand and the company’s dominant position in copper-based connectivity solutions.
Goldman Sachs analyst coverage highlights Credo’s strategic position in the ongoing debate between copper and optical networking solutions for AI data centers. The firm believes copper-based Active Electrical Cables will remain competitive far longer than many market participants expect, supporting Credo’s multi-year growth runway.
Copper-Based Solutions Maintain Competitive Edge in AI Infrastructure
According to Goldman Sachs, Credo Technology holds the largest market share in high-speed Active Electrical Cables, which connect GPUs inside AI clusters and link server racks in hyperscale data centers. These cables are essential infrastructure that enable chips from Nvidia, Amazon, Microsoft, and Meta to function effectively at scale.
The investment bank argues that copper-based AECs offer several critical advantages for short-range connections. They cost less than optical alternatives, reduce power consumption by up to 50%, provide high signal integrity, and minimize link flaps—brief connection interruptions that can halt expensive AI training operations lasting days.
Extended Timeline for Copper Viability
Goldman Sachs forecasts that approximately 80% of data center switching ports will remain at speeds where copper solutions are effective until 2030, based on industry projections. The firm expects the transition to higher lane speeds will progress slowly, keeping copper viable until at least 2032, according to the research note.
This extended timeline is significant considering that more than 90% of Credo’s current revenue comes from its HiWire AEC products. The company’s vertically integrated manufacturing model provides a favorable price-performance advantage compared to competitors including Marvell and Astera Labs, Goldman noted.
Strong Financial Performance Supports Bullish Outlook
Credo Technology posted revenue of $268 million in its most recent quarter, representing 272% year-over-year growth. Earnings per share reached 67 cents, exceeding analyst expectations and triggering a 10% share price increase on the report.
For fiscal 2026, analysts forecast approximately $1.19 billion in revenue and $2.81 in EPS, a substantial increase from $0.70 per share in fiscal 2025. However, Goldman’s estimates are even more optimistic, with FY26 and FY27 EPS projections running 7% and 32% above consensus, respectively.
The firm models approximately 37% revenue compound annual growth rate from FY26 to FY29, along with an operating margin expansion of about 550 basis points. Goldman projects EPS reaching $5.55 in FY27, supporting its bullish thesis on the stock.
Customer Traction and Market Expansion
Credo generates revenue from four of the top five U.S. hyperscalers, with a fifth customer beginning to ramp production, according to Goldman Sachs. This customer concentration represents both an opportunity and a risk, as more than 90% of revenue comes from four hyperscale clients.
Additionally, management believes the company’s total addressable market could expand to $10 billion within the next few years, more than triple the size from 18 months earlier. Credo is investing in product diversification including ZeroFLAP optical transceivers, Active LED Cables using microLEDs, and memory gearboxes designed to address AI inference bottlenecks.
Valuation and Risk Factors
Goldman’s $165 price target is based on a 26x forward earnings multiple, well below Credo’s historical median multiple of 61x. The firm characterizes this as near-trough valuation, seeing earnings power rising while valuation remains compressed.
However, Goldman acknowledges several risks that could impact the investment thesis. The biggest threats include faster-than-expected optical networking adoption, intensifying competition in the AEC market, and customer concentration creating vulnerability to slowdowns in hyperscaler capital expenditure.
Despite these concerns, Goldman’s bull/base/bear discounted cash flow framework suggests a positive risk/reward skew of 1.6:1. The firm forecasts hyperscaler capex could exceed $533 billion in 2026, providing a supportive backdrop for AI infrastructure investments.
Investors will monitor Credo’s upcoming quarterly results and product development updates to assess whether the company can maintain its competitive position as data center architecture continues evolving. The sustainability of copper-based solutions in the face of advancing optical technology remains the critical factor determining the stock’s long-term trajectory.
