Why Credo Technology's $8B Post-Earnings Sell-Off Is A Massive Overreaction

The Asian Investor 33.12K Followers Follow Summary Credo Technology delivered record Q1 results, with revenues up 115% year-over-year on strong demand for its AI data center connectivity products. Despite beating top- and bottom-line estimates, CRDO shares dropped 20%, mainly due to concerns about a 2.9 PP GAAP gross margin contraction, driven by product mix changes. I see the market’s reaction as excessive, given CRDO’s strategic transition to higher-value integrated modules and the robust, long-term AI infrastructure CapEx cycle. Non-GAAP gross margins remained fairly stable, and management also guided for the potential of GM expansion in the second quarter. With a forward price-to-revenue ratio of 7.9x versus a 7.4x 3-year average, I view the current valuation as an attractive buying opportunity. Tim Robberts/DigitalVision via Getty Images With demand for data center products continuing unabated in the second quarter, Credo Technology ( CRDO ), a data center infrastructure provider that provides connectivity products to connect AI clusters, exceeded expectations for its last financial This article was written by The Asian Investor 33.12K Followers Follow I am interested in a lot of technology and AI stocks like Google, Nvidia, AMD, Tesla and Amazon. Analyst’s Disclosure: I/we have a beneficial long position in the shares of CRDO, ALAB, MRVL, GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.