Credo Technology stock surged roughly 15% on April 13 after Jefferies initiated coverage with a Buy rating and a $175 price target, arguing investors may still be underestimating the company’s long-term AI opportunity.The rally pushed shares to around $138, extending Credo’s gain to an impressive 162% over the past year. Even after that run, Jefferies believes the stock still has meaningful upside as demand for high-speed AI connectivity solutions continues to accelerate across hyperscale and cloud data centers.Here’s why the firm believes Credo’s growth story may still be in the early innings.Jefferies sees upside ahead for CredoJefferies analysts led by Blayne Curtis shared his thoughts in a new investor note. “We see a meaningful opportunity to invest in a premium growth name at a significantly discounted valuation and view a significant disconnect between the market’s perception of the AI opportunity for CRDO over the next several years relative to the actual opportunity.”The firm said Credo’s active electrical cable (AEC) business remains a critical part of modern AI and data center infrastructure, and pushed back against concerns that newer optical technologies could quickly displace that business.More Credo:Credo’s blowout quarter hides a huge risk Wall Street can’t ignoreCredo Technology (CRDO) soared, and Goldman sees more room to runOne AI stock is up 180% in 2025 (It isn’t Palantir)Jefferies also highlighted Credo’s growing opportunity in optical transceivers, estimating the company is targeting a $2.2 billion addressable market and, with a 10% share, could generate roughly $225 million in future Oracle-related revenue while capturing additional upside from NeoCloud and other hyperscaler customers.Overall, Jefferies believes Credo is well-positioned to benefit as AI infrastructure spending continues to expand across both the copper and optical connectivity markets.AI AEC demand holds at scaleCredo’s latest quarter marked a major step change in the quality of the business. Revenue jumped 201.5% year over year to $407 million, and the company guided fiscal fourth quarter revenue as high as $435 million, signaling that the spike in AEC demand tied to hyperscale and AI deployments is continuing rather than fading.The company is now shipping at scale into active AI cluster buildouts. Management reinforced that point by saying it expects more than 50% year-over-year growth next fiscal year even after posting a 200%-plus revenue quarter.That directly challenges the bear case that current demand is simply a temporary spike or inventory pull-forward.The core question for investors is whether AEC demand reflects a durable infrastructure build cycle or just a narrow burst of spending. Right now, the numbers suggest this is durable.When a connectivity supplier can triple revenue and still guide for 50%-plus growth the following year, it likely points to the company serving a critical piece of AI infrastructure rather than benefiting from a temporary spending wave.ZeroFlap optics adds second growth engineCredo’s progress in optics is the other major development investors should watch. ZeroFlap Optics is beginning to look more like a legitimate commercial platform than a long-term strategic option.Jefferies estimates ZeroFlap could represent a $300 million-plus annual revenue opportunity, including roughly $225 million tied to an Oracle-related transceiver opportunity. That gives investors a concrete framework for the optical upside and, more importantly, a path beyond copper.
ZeroFlap Optics is emerging as a meaningful new growth driver for Credo.Yuichiro Chino via Getty Images
The strategic significance extends beyond the near-term revenue opportunity. If optics begins scaling meaningfully, Credo becomes less reliant on defending its current copper position and better equipped to remain relevant as interconnect architectures evolve. In that scenario, optics stops looking like a future threat to AEC and instead becomes another avenue for Credo to capture customer spending.That doesn’t eliminate execution risk, but the size of the opportunity is already large enough to matter relative to Credo’s current revenue base. If ZeroFlap ramps, it extends the growth runway rather than merely adding upside around the edges.What could drive CRDO higherSustained AI cluster buildouts boosting AEC demandExtended revenue visibility into next fiscal yearZeroFlap transceiver wins converting into production revenueStronger positioning if interconnect demand shifts toward opticsSustained 30%+ operating margins supporting valuation expansionStrong cash generation and debt-free balance sheetWhat could pressure CRDO stockAI rack design changes reducing AEC content per clusterSlower-than-expected ramp in ZeroFlap/optics opportunitiesDelays in Oracle-related production winsHeavy customer concentration among hyperscalersPricing pressure in high-speed connectivity marketsHigher spending weighing on marginsKey takeaways for CRDO investorsCredo’s latest results show the company is executing at a high level, with revenue rising 201.5% year over year to $407 million and fiscal Q4 guidance calling for as much as $435 million.Management also expects more than 50% growth next year, suggesting demand remains strong even after a breakout year. At the same time, Credo is expanding beyond AECs as ZeroFlap Optics gains traction, providing another potential growth driver if adoption ramps up as expected.Investors now need to watch whether Credo can sustain elevated growth, convert optical opportunities into real revenue, and maintain strong margins as the business scales.Related: Credo Technology (CRDO) soared, and Goldman sees more room to run