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Goldman Sachs Bets Big on Credo's AI Connectivity
19 Feb
Summary
- Goldman Sachs initiated Credo Technology Group with a buy rating and $165 price target.
- Credo's Active Electrical Cables (AECs) offer a lower-cost, high-bandwidth solution.
- AI data center demand is surging, boosting Credo's market position.
Goldman Sachs has initiated coverage on Credo Technology Group, recommending a buy rating and forecasting a 12-month price target of $165. This projection suggests a potential 29% increase from recent trading levels.
Analyst James Schneider highlighted Credo's vertically integrated business model as a source of sustained competitive advantage. The company's Active Electrical Cables (AECs), which are copper-based cables with integrated signal boosting components, are noted for delivering lower costs and high bandwidth for short-range data center connections.
The surging demand for artificial intelligence use cases has significantly increased the need for advanced data center connectivity. Schneider anticipates that copper solutions will remain dominant in this space for at least the next five years, while also noting Credo's strategic diversification into optical solutions to ensure long-term growth.
Shares of Credo Technology Group have already experienced substantial growth, increasing by 78% over the past 12 months. The analyst also praised the company's transparent guidance and investor communications, indicating a favorable risk-reward profile for the stock.
