I'm BUYING This Stock Hand Over Fist

Imagine this. A company reports 115% revenue growth. Profits grow 140% and guidance comes in above analyst expectations and management also tells investors that demand from AI data centers continue expanding. If I told you all of that, odds are that your response would be, "Well, that stock is likely jumped way higher." Wrong. Instead, this is a stock that got absolutely crushed. And that is exactly what just happened to Credo Technology, stock ticker CRDO. After earnings, shares fell more than 20% at one point, even though the underlying business continued growing at an exceptional rate. Year-to date, shares of Credo are still up nearly 20% so far in 2026. But since reaching a high at the end of June, shares of Credo have collapsed more than 40%. And I think this disconnect has created one of the most interesting buying opportunities in the AI market right now. In fact, I'm buying credo on the weakness. But to be very clear, I'm not buying simply because the stock fell. I'm buying because when I look at what is happening inside of AI data centers, when I look at the amount of money hyperscalers are spending, when I look at NVIDIA and Broadcom's latest results, among others, they are all pointing to more and more spending that is taking place right now and guiding towards even more in the coming year. So regardless of sentiment, it's important to separate stock performance from company performance. So, when I look at Credto's growth, I think the long-term thesis is actually getting stronger, not weaker, like the stock price. So, today, I'm going to break down exactly what Credo does, why its technology is becoming very important for AI, what investors didn't like about the latest earnings report, the risk that could make me wrong, and why this sell-off has me buying more. And to finish it all off, we'll take a look at an option play for you to consider as well. So, before we dive in, do me a huge favor. Smash that like button down below. Subscribe to the channel. And if you want to get my trade alerts anytime I'm buying a new stock or entering an option play, make sure you join my private investing group. Check out that link down in the pin comment below. All right, with that being said, let's get right into it with part number one. This is a stock that got crushed. And again, the business didn't, the stock did. So, let's start there with their latest earnings results because the reaction was wild. Credo reported Q1 revenue of $479 million. That was up 115% year-over-year and almost 10% sequentially. Non-GAAP net income came in at 236 million. And profitability is exploding as well. And adjusted EPS reached a $120. Wall Street was just looking for $1.17. Revenue beat expectations. Earnings beat expectations. But here's what really matters. This wasn't some one quarter fluke. Credo has now produced seven consecutive quarters of tripledigit revenue growth. Seven straight quarters. That's extraordinary. And the guidance wasn't bad either. Management guided next quarter revenue between 525 million to 535 million. So that midpoint's right around 530 million. That would represent nearly 100% year-over-year growth. So just put these numbers together. This quarter 115% next quarter 100%. And yet the stock collapsed. So that immediately raises some questions. What exactly was the market upset about? Before we answer that, you need to understand why this company is growing so quickly in the first place. And that brings us to part number two. What does Crito actually do? Crito is essentially a connectivity company. And that might not sound particularly exciting until you understand what's happening inside of modern AI data centers. Think about an enormous AI cluster. You have thousands or eventually hundreds of thousands of GPUs and accelerators. Those processors constantly need to communicate. They need to send information between servers, between racks, switches, between memory, between different pieces inside the data center. And as AI models become larger, the amount of data moving through those systems explodes. This creates a major problem. You can have the fastest, most powerful GPUs on Earth, but if the data can't get to the GPU quick enough, the GPU just sits there waiting. That's wasted compute. Let me put it this way. Think about a few years back when people wanted to buy the new 4K or nowadays 8K television. Well, it's great you have a 4K TV, but if there's no content being recorded for 4K really, then it's not really all that helpful. And you are paying hundreds, if not thousands more for a highquality television, but can't really get out of it what you're paying for. The same goes for these powerful high-speed GPUs and such that can cost tens of thousands of dollars each and data centers costing billions of dollars. Nobody wants expensive accelerators sitting idle because of a connectivity bottleneck. That's where Credo comes in. CTO has become especially well known for something called active electrical cables or AEC's. Now, the easiest way to think about an AEC is this. A normal copper cable moves data from point A to point B. But as data speeds increase, copper runs into a few problems. Signal degradation, power consumption, heat, distance limitations. And don't get me wrong, I've been a big fan of copper and was telling my investing group about COPX, a very popular copper ETF, a while back. And here we are sitting at all-time highs. And again, you can get all of those trade alerts and more when you join my private investing community. See that pin comment down below. But back to Credo. Crito puts its own semiconductor technology inside the cable assembly to clean up and strengthen the signal. So now you've essentially turned a basic cable into a smart high-speed connection. And in AI data centers, those advantages become extremely valuable. Now, this is where the story gets even more interesting. You might ask, well, why wouldn't everyone just simply replace copper with fiber optics? Because optical connections tend to be number one more expensive, more complex, and more power hungry. So for shorter distances inside the data center, copper can still make enormous economic sense. And Credo's technology helps extend how far and how fast copper can operate. In other words, CTO is helping data center operators avoid using expensive optical technology everywhere. But importantly, Credo isn't betting only on copper anymore. Management now describes the company's portfolio as spanning connectivity from millimeters to kilometers with solutions across both copper and optics. That diversification matters. Now, let's move on to part number three where AI makes connectivity more important, not less. Here's why I remain so bullish on the underlying market. The AI infrastructure buildout is becoming more complicated. We aren't simply putting more GPUs into buildings. We are creating enormous distributed computing systems and every time you add more compute you create more connections, more switches, more cables, more bandwidth requirements and potentially more opportunities for a company like Credo. This is why I've said it before the next major AI bottleneck may not be compute. It may be moving data between all of the compute. And we've just gotten multiple pieces of evidence that the broader infrastructure boom remains intact. Nvidia confirmed the buildout in their latest quarter. They showed data center revenue increasing 117% year-over-year while total revenue increased 106%. And Nvidia said that the top five hyperscalers could spend approximately 1.3 trillion in capital expenditures in 2027. That's an incredible amount of infrastructure spending. And Credo doesn't need all of it. It just needs a small piece of the connectivity spending embedded inside those enormous AI clusters. Then we also heard from Broadcom as they reported and they raised their fiscal 2027 AI semiconductor revenue outlook to approximately 115 billion. But they didn't stop there. They also gave us a look into 2028 where they expect semiconductor revenue to reach potentially 230 billion doubling what they expect next year. Think about what that means. Nvidia is telling us hyperscalers are spending enormous amounts. Broadcom is increasing its AI revenue expectation, telling us hyperscalers are continuing to spend more and Credo is growing revenues 115%. These aren't three isolated stories. They're all telling us essentially the same thing. AI infrastructure spending is still expanding rapidly and Credo sits directly in the middle of that buildout. Now, let's move on to part number four. So, why did the stock collapse? All of this sounds great. So, we need to address the elephant in the room because there were legitimate reasons investors sold the stock. They may have sold too much, but it's important and I don't believe in the saying, "The company beat earnings, therefore the market's stupid." Markets usually react to changes in expectations, not simply whether EPS beat by a few pennies. And Credo entered earnings with extremely high expectations. Issue number one was gross margins. The first concern was that non-GAAP gross margins came in at 68% and management guided next quarter to between 67 and 69%. Still an excellent gross margin, but investors had become accustomed to tremendous operating leverage and very high profitability. When you're trading at expensive valuation, the market doesn't want great, it wants better than expected. So even a small change in margin trajectory can become a reason to take profits. Issue number two has to do with AEC growth. The second concern was the outlook for the cable business. Credto's active electrical cable business has been one of the major engines behind the company's explosive growth and analysts raised questions about whether AEC growth could begin moderating as the business becomes dramatically larger. These are legitimate concerns because no company grows 100% forever. Issue number three is optical. And I think optical is perhaps the most important piece to monitor as a credo investor moving forward. Crito has been expanding beyond copper into optical connectivity. The company acquired Dust Photonix earlier this year to strengthen that optical portfolio, but that optical ramp appears to be taking longer than investors had hoped. So the question becomes, can Credo successfully move from being primarily an AEC winner into a broader connectivity platform? That's something I'm watching very closely myself because if the answer is yes, the addressable market becomes even larger than it already is. And that brings us to issue number four, which some may not look at as an issue, but that's going to be valuation. Credo became one of the hottest AI infrastructure stocks in the market. When a company is growing this quickly, investors are willing to pay enormous multiples. But high valuation creates fragility. If expectations go from absolutely perfect to merely excellent, the stock can easily fall 20% almost overnight, which is exactly what we just saw. So, I don't want anyone watching this video to think I'm arguing Credo is risk-f free. It's absolutely not. This is a volatile high- growth semiconductor type company and it can move dramatically in either direction. But to me, the riskreward ratio is quite compelling after the big draw down. Looking here, you can see earnings are expected to grow more than 85% this fiscal year and trade at an earnings multiple of 27 times, which to some might sound high at face value, but for growth of 85% plus, I like it. Looking at another angle, we're looking here at EV to Ebida and price to free cash flow. Those multiples are also trading at some of the lowest levels we have seen for this particular stock. And I like that. And with that being said, now let's move on to part number five. Why I think the market may be missing the bigger story. And here's why I'm still buying. Look at the business rather than the share price. Revenue 115%. Next quarter growth roughly 100%. Non-GAAP net income that was 140%. They have nearly 800 million in cash. And the company is operating inside one of the fastest growing areas of technology. So, you have to ask yourself, did the long-term AI networking thesis get weaker after the latest earnings report? For me, the answer is no. If anything, the broader industry evidence continues supporting, and that's why I think this sell-off is just overdone. This is one of the most important lessons in investing. Stocks and businesses don't always move together over short periods of time. Sometimes the business improves, revenue grows, profits grow, and the opportunity expands, but the stock falls because expectations in the near- term just got too high. And that can be painful again in the near- term if you already own the stock. But if you're trying to build a position like I am, it creates opportunity. I'm not asking is credo down. I'm asking at the lower price, am I being offered a better riskreward for a business whose long-term thesis remains intact? And for me, that answer is yes. So now let's move on to the next part. What would make me change my mind? So why would I stop buying? Well, there's several reasons. Number one is AI infrastructure spending materially slows. If we look at next quarter Nvidia or next year, Nvidia and Broadcom start talking about uh hyperscalers suddenly pulling back on their spending. Well, that's a major thesis change. A second item would be AEC demand falls faster than I expect. Moderating growth is normal. Actual demand deterioration would be different. Number three, optical fails to ramp. I want Credo to become a broader connectivity platform. If optical continues getting delayed or can't gain traction, well, that reduces the upside. Number four, major customer losses. Customer concentration means losing one major hyperscaler could matter enormously to this particular company. And number five is going to be valuation. I love the business. That doesn't mean I'm willing to pay anything for it. There's always a price where expected returns stop making sense. And now we go on to part number seven. Why I'm buying handover fist. And at today's reduced prices, this is one of the AI names where I'm becoming increasingly interested. And here's the simplest way I can summarize my thesis. AI is creating an unprecedented amount of compute. That compute needs to communicate. As clusters grow larger, connectivity becomes harder. Higher bandwidth becomes necessary. Power efficiency becomes more important. and companies are willing to spend money solving those problems because expensive GPUs sitting idle are even more costly. Credo is directly exposed to this trend and the latest earnings report showed the business is still growing extraordinary quickly. The market simply wanted even more. So yes, the stock could absorb and and end up falling further. It's September. Rates remain elevated. We don't know what the Fed's going to do. Semiconductor stocks have been volatile. Credo itself is extremely volatile. I'm not trying to call an exact bottom. I'm building the position and when I see the company already I wanted to own that has reported 115% revenue growth. They're guiding for another 100% growth next quarter. Well, the stock gets repriced dramatically lower. That's exactly the type of situation where I'm willing to start buying aggressively. But let's say you're not ready to buy right now. Maybe you can take the options route as well. So, let me show you an options contract that I'm looking at inside of my private investing community. Here's a trade that I recently opened on shares of Credo. I sold a cash cured put with an October 16th expiration date and a strike price of $135 per share. That's me saying I'm willing to buy those shares if they dip even further down to $135 or below. And for that, I earned $330 in income per contract. So the cash or margin needed here is 13,500 roughly. And this is the way that I can sell stocks, potentially buy them at lower prices, stocks I want to own at better prices, and earn income along the way. These are the types of trade alerts you get inside of my options edge community here. If you're interested in seeing how you can generate thousands of dollars in options, that's what that community is geared towards. So that's why I'm interested in credo, buying credo, selling puts on credo after this selloff that we've seen. Not because the stock is down, but because I believe the market has temporarily created a disconnect between stock price and long-term business opportunity. Now, I want to hear from you. Do you think Credo is a buying opportunity here after the big sell-off? Or do you think valuation and the slowing AEC expectations still make the stock too risky? And if you are buying, what's your price? Let me know down in the comment section. And if you enjoyed the video, make sure again you smash that like button down below, subscribe to the channel, and with that being said, we'll see you in the next one. Take care.