$500 purple cables put Credo in middle of the AI boom

In July, Elon Musk posted photos from inside the xAI data center called Colossus 2, which the artificial intelligence startup aims to turn into a massive supercomputing facility in Memphis, Tennessee.

The photos shared by Musk on the X stream did not show that it was expensive Nvidia Racks full of powerful graphics processing units. Instead, he focused on the cables behind the servers, including an image with thousands of neat purple wires connecting the computers.

These purple cables BeliefA 17-year-old Silicon Valley-based semiconductor company whose name is rarely mentioned alongside the leaders of the AI ​​boom.

But Wall Street noticed.

Credo shares have more than doubled this year to $143.61 after surging 245% in 2024. The company’s market capitalization, which was around $1.4 billion at the time of its IPO in 2022, is now close to $25 billion. Credo is trying to position itself as a key supplier in the expansion of trillion-dollar AI infrastructure and is taking advantage of that as the money flows downstream.

The stock rose 5% on Friday, following analysts. JPMorgan Chase It initiated coverage for the equivalent of a buy rating and a share price of $165. The active electrical cable (AEC) market, pioneered by Credo, is on track to reach $4 billion by 2028 as all major hyperscalers invest in data center construction, they said.

“The industry outlook is supported by increasing deployments from major companies like Amazon, Microsoft, and xAI, as well as expanding adoption including Meta and more,” analysts wrote. They predict annual revenue growth for Credo will be at least 50% by 2028.

Income fiscal 2025The sale, which ended in early May, more than doubled to $436.8 million. The company also turned a profit, recording net income of $52.2 million after losing $28.4 million the previous year. Analysts expect sales to more than double to almost $1 billion in fiscal 2026, according to LSEG.

Credo’s purple AECs cost between $300 and $500 each, depending on volume discounts and other bargains, industry researcher 650 Group estimates. They are rugged, medium-thick copper cables wrapped in a braided coating, containing large connectors with chips on both sides.

Much of the excitement around Credo stems from the AI ​​boom that has been driven to this point by a handful of hyperscalers who are rapidly building data centers for expected future workloads. Analysts expect $1 trillion in spending on AI data centers by 2030, but any pullback from major cloud providers or scaling back on OpenAI’s plans could hurt many vendors, including Credo.

For now, the predictions are very up and to the right.

Previous servers typically had one or two processors on a motherboard. Individual servers today can have as many as eight, and the most powerful AI models require potentially millions of GPUs working together.

Each GPU needs its own connection to a switch, which is the term for a computer that routes data around the cluster, usually mounted at the top of a server rack.

Nvidia’s latest products combine several of these motherboards to form a 72-GPU system. Nvidia says next year’s fastest racks will have twice as many, and a Kyber rack the following year will have 572 GPUs.

“In the past, Credo’s opportunity was one cable per server, but now Credo’s opportunity is nine cables per server,” said 650 Group analyst Alan Weckel. He estimates Credo again has 88% of the AEC market. Astera Laboratories And Marvel.

The company does not name its hyperscaler customers, but analysts say Amazon And Microsoft as customers. Matt Garman, CEO of Amazon Web Services sent An image of the company’s Trainium AI chip racks posted on LinkedIn on Friday, showing Credo’s purple wires.

Credo said it expects three or four customers this year, including two new hyperscale customers, to account for more than 10% of revenue in the coming quarters.

Amazon and Microsoft declined to comment. Meta and xAI did not respond to requests for comment.

At a conference for data center professionals in San Jose this week, Credo presented alongside a representative from Oracle Cloud. A sample rack of Nvidia GPUs designed by Meta exhibited at the fair Credo’s purple cables stood out prominently.

“Every time you see a new announcement of a gigawatt data center, you can be assured that we see it as an opportunity,” Brennan told investors in his earnings call in September.

This is a market that everyone in the AI ​​network is targeting.

Analysts at TD Cowen predicted earlier this month that the market for AI networking chips could be worth $75 billion annually by 2030. Major players include Nvidia and Advanced Micro DevicesThey both have their own networking businesses and have the power to determine which technologies become part of their larger systems.

When he joined in 2013, Brennan’s mandate was to commercialize the technology. company upgraded first round In 2015, venture financing was secured from investors including Walden International, led by Lip-Bu Tan, who is now Intel’s CEO.

The AEC business didn’t take off until the AI ​​boom of the early 2020s because data centers didn’t yet need the technology, Brennan said.

But there was early excitement in the air when Musk’s car company came knocking in 2017. Tesla’s He wanted help with his Dojo AI supercomputer and needed chips with more bandwidth than were available at the time.

Now Credo hopes to use its foothold with active copper cabling to expand into additional product lines, including in-rack connections, or what’s called “scale-up” networking. The company this week announced new transceivers and software for optical cables.

“You’ve got market traction that we’ve never experienced before,” said Brennan. “If you could deliver the next generation right now, it would be consumed. The generation after that would be consumed as well. There is an insatiable demand from the AI ​​cluster world.”

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