Shares of Credo Technology rose 11% on Monday after Jefferies initiated coverage with a Buy rating, highlighting what it called a disconnect between investor concerns and the company’s long-term growth prospects in artificial intelligence infrastructure.
The stock move comes amid an ongoing debate over whether copper-based connectivity solutions will be displaced by optical technologies in AI data centers.
While this uncertainty has weighed on Credo’s shares—down nearly 7% this year—Jefferies argues that the market may be underestimating the company’s opportunity.
Copper demand seen resilient despite optics debate
Jefferies analyst Blayne Curtis, who initiated coverage on the stock with a Buy rating and a $175 price target, described the current market narrative as disconnected from reality.
The analyst said there is a “significant disconnect” between how investors perceive Credo’s artificial intelligence opportunity and its actual growth potential.
According to Curtis, demand from both AI and general-purpose computing workloads provides “plenty of runway for AECs” to expand. He noted that adoption of these cables remains in its early stages, with next-generation 800G and 1.6T AECs expected to drive a larger and longer growth cycle than currently anticipated.
“Fears of the death of copper or potential impact from CPO are wildly overblown,” Curtis said.
Jefferies also emphasized that active electrical cables have a “clear runway for continued growth” as AI data centers scale up capacity.
Market opportunity and competitive positioning
Jefferies forecasts the total addressable market for AEC units to reach 8.6 million this year and 12.3 million by 2027. In a more optimistic scenario, those figures could rise to 9.5 million and 14.6 million, respectively.
In the bull case, Curtis expects Credo to maintain a 70% market share by 2027, translating to approximately $3 billion in AEC revenue. This projection exceeds the current consensus estimate of $2.3 billion.
Curtis described Credo as “the outright technology leader in the space,” adding that the company is well-positioned to remain dominant despite competition from Astera Labs and Marvell Technology.
He also dismissed concerns about the impact of co-packaged optics on Credo’s business, stating that CPO in AI data center networking is “essentially a complete non-factor for [Credo’s] business.”
Expansion into optical solutions adds upside
While much of the debate centers on copper versus optics, Credo is also expanding its presence in optical connectivity. The company is developing active LED cables (ALCs), which are positioned as a hybrid solution offering high-speed performance with improved energy efficiency.
Curtis believes investors are underestimating the potential of these products, which could serve as a bridge between traditional copper and fully optical systems.
In addition, Credo is advancing its ZeroFlap optical transceivers, designed to improve reliability and stability in AI chip clusters. Jefferies estimates these products could generate more than $300 million in annual revenue, representing what Curtis called “a major swing factor” for the company’s diversification strategy.
Taken together, Jefferies argues that Credo offers “a meaningful opportunity to invest in a premium growth name at significantly discounted valuation.”
As AI infrastructure spending accelerates, the firm maintains that both copper and optical technologies will play complementary roles, with Credo positioned to benefit from demand across both segments.
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