CRDO vs. AVGO: Which AI-focused Semiconductor Stock is the Better Buy?

Core Insights - The semiconductor companies Credo Technology Group Holding Ltd. (CRDO) and Broadcom Inc. (AVGO) are positioned to benefit from the rapid transformation of the data center market driven by AI and digital initiatives [1][2] Group 1: Credo Technology Group Holding Ltd. (CRDO) - Credo is gaining market presence in Ethernet and Active Electrical Cables (AECs) for data centers, with AEC products experiencing triple-digit sequential growth in Q3 of fiscal 2025 [4] - The demand for AECs is increasing due to their reliability, offering over 100 times improved performance compared to laser-based optical solutions, solidifying Credo's market position [4][6] - CRDO is expanding its product portfolio to include PCIe solutions to meet the growing demand for AI scale-out and scale-up networks [5] - Strong customer interest in CRDO's PCIe and Ethernet retimers highlights the importance of high-performance solutions in the expanding AI server market, with PCIe retimer demand expected to exceed $1 billion by 2027 [6] - The launch of the Lark Optical DSP family aims to enhance 800G optical transceivers, with products designed for power efficiency in AI data centers [7] - For Q4 of fiscal 2025, CRDO expects revenues between $155 million and $165 million, indicating a growth of 163.2% year-over-year [8] Group 2: Broadcom Inc. (AVGO) - Broadcom is a diversified semiconductor company with a strong focus on AI chip development [9] - AVGO anticipates significant opportunities in the AI sector, with three hyperscaler customers planning to deploy 1 million XPU clusters by 2027, leading to a serviceable addressable market of $60 billion to $90 billion for XPUs and networks [10] - The next-generation XPUs are being developed in 3 nanometers, with plans for the first 2-nanometer AI XPU, targeting large-scale clusters for hyperscale customers [11] - In the last reported quarter, AVGO's semiconductor solutions revenues totaled $8.2 billion, an 11% year-over-year increase, with AI-related revenues growing 77% to $4.1 billion [12] - For Q2 of fiscal 2025, Broadcom expects revenues of $14.9 billion, with AI semiconductor revenues projected to grow 44% year-over-year to $4.4 billion [13] Group 3: Price Performance and Valuation - Over the past month, CRDO and AVGO have seen stock gains of 67.8% and 36.3%, respectively [14] - In terms of forward 12-month Price/Sales ratio, CRDO is trading at 15.50X, slightly lower than AVGO's 16.05X [15] Group 4: Analyst Estimates - Analysts have kept earnings estimates unchanged for CRDO in the past 90 days, while AVGO has seen a marginal upward revision in estimates [16][20] - CRDO currently holds a Zacks Rank 3 (Hold), while Broadcom carries a Zacks Rank 2 (Buy), indicating AVGO may be a better investment pick at this time [20]