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Key Points
- Credo Technologies and Astera Labs are two niche players in the semiconductor and AI ecosystem, providing specialized connectivity solutions.
- Their shares have gone on huge runs, both up more than 70% in the past 52 weeks.
- Earnings from Oracle and Broadcom injected significant gains into both stocks recently, highlighting two dynamics that are key for investors to understand.
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Credo Technology (NASDAQ: CRDO) and Astera Labs (NASDAQ: ALAB) are some of the fastest-growing beneficiaries of the artificial intelligence (AI) data center buildout.
As key suppliers in the data center ecosystem, the results and commentary coming from players upstream of Astera and Credo are vital to evaluating their future. Hyperscaler Oracle (NYSE: ORCL) and custom AI semiconductor stockBroadcom (NASDAQ: AVGO) are prime examples.
These two names recently reported earnings. Their better-than-expected results and some interesting commentary helped CRDO and ALAB soar. Let’s break down why, as knowing where CRDO and ALAB fit in the data center ecosystem is key to understanding their paths going forward.
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How Credo and Astera Power AI Data Center Connectivity
Credo and Astera sit squarely in the AI infrastructure networking bucket. Their products help connect processing chips, like NVIDIA (NASDAQ: NVDA) graphics processing units (GPUs). These connections allow processing chips to communicate with each other and execute tasks.
Credo’s primary product is its HiWire active electrical cable (AEC). These copper-based solutions can be much longer than traditional passive copper cables while preserving signal integrity. They also use less power and are cheaper than optical cables.
Astera’s smart retimers offer similar benefits, but through chips rather than cables. Astera offers AECs too, but smart retimers are by far its largest revenue source.
The big picture is that more data centers mean more networking equipment, expanding the market that Credo and Astera can target.
This is why these stocks rose 3.2% and 7.1%, respectively, after Oracle’s latest earnings report.
Oracle’s Data Center Capacity Ramp Signals Faster Infrastructure Demand
Oracle significantly beat growth estimates in its latest report. Strong performance in Oracle Cloud Infrastructure drove this, showing that infrastructure demand is outpacing expectations.
Oracle delivered 400 megawatts of data center capacity in the quarter and indicated that the pace of this expansion will accelerate.
It plans to bring 10 gigawatts (10,000 megawatts) of capacity online over the next three years.
That would imply 3.3 gigawatts per year or double the 1.6 gigawatt annual run rate (400 megawatts per quarter) the firm just delivered. Faster data center buildouts are a big positive for Credo and Astera, which are part of the connective tissue of these facilities.
This isn’t to say whether Oracle is a Credo or Astera customer, but rather to show that the accelerating pace of data center deployment is a rising tide that will lift both ships.
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AVGO Supports CRDO and ALAB’s Runway with Copper Forecast
While more data centers are a positive for Credo and Astera, the conversation is a bit more complicated than just that. Credo and Astera’s primary revenue-generating products are copper-based. The alternative to copper networking is optical solutions, which transmit data using light rather than electricity. Optical solutions can handle more data, but they also use more power and are more expensive. For these reasons, data center operators want to keep using copper-based solutions for as long as possible.
This is part of the reason why Credo and Astera also got big boosts after Broadcom’s earnings release. The two stocks rose 11.9% and 5.5%, respectively.
The gains in Credo and Astera came as Broadcom CEO Hock Tan provided some perspective on the copper versus optical battle. Tan says that in "scale-out" architectures, where data center operators place servers next to each other and connect them, they use optical networking. However, the story is different when it comes to "scale-up" architectures, where companies pack more processing chips into each server. Scale up is the domain that Credo and Astera primarily play in, though they have scale out solutions as well.
In 2028, Tan believes Broadcom’s scale-up customers will likely still be using copper. He noted that copper technology is good enough that customers don’t need to run toward highly advanced optical solutions, like co-packaged optics (CPO), at this time.
CPO describes when processing chips have optical networking components built directly into them. CPO adoption is a long-term threat to CRDO and ALAB. So, the idea that CPO adoption may be slower than some expected, according to Tan, is a positive for CRDO and ALAB. This is particularly true, as Broadcom is a leader in CPO. Because of this, Tan doesn’t necessarily have a vested interest in CPO delay; he’s simply being realistic about the timeline. This adds legitimacy to his statement.
More copper usage improves CRDO and ALAB’s ability to grow in the near term. In the meantime, they can work on expanding their optical solution set to be ready when a larger shift away from copper takes place.
CRDO & ALAB: Niche Players Benefiting From the Data Center Boom
Overall, these pieces of information from Oracle and Broadcom lend support to the outlooks of CRDO and ALAB. Going forward, investors should be aware of how the changing dynamics of copper and optical networking affect these companies.
While these are positive developments, there are also key risks to consider with these two stocks. One example is customer concentration. In 2025, five customers accounted for 84% of ALAB’s revenue. CRDO is significantly more concentrated, with two customers accounting for 87% of revenue last quarter. Should spending at just one or two customers trail off, CRDO and ALAB could be significantly affected.
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