ZACKS·2025-11-17 14:31Core Insights - Semiconductor companies are central to the AI revolution, providing essential infrastructure for AI workloads [1] - Investors are increasingly focusing on companies that support AI infrastructure, with Credo Technology Group Holding Ltd (CRDO) and Broadcom (AVGO) as key players [1][2] Group 1: CRDO Overview - CRDO employs a system-level approach, owning the entire stack of SerDes IP, Retimer ICs, and system-level design, which enhances innovation and cost efficiency [3] - The growth of CRDO is driven by its AEC business, which has seen significant adoption due to its power-efficient solutions, offering up to 1,000 times more reliability with 50% lower power consumption compared to optical solutions [4] - CRDO's optical DSP segment is expected to double its revenues in the current fiscal year, with new PCIe retimer solutions gaining traction and anticipated design wins in 2025 [5][6] Group 2: CRDO Challenges - CRDO faces a competitive landscape and macroeconomic uncertainties, with a high customer concentration risk as three hyperscalers contribute over 10% of revenues [7][8] - Management expects revenue contributions from these hyperscalers to increase, but any slowdown in spending could significantly impact performance [8][10] Group 3: AVGO Overview - AVGO's AI semiconductor revenues reached $5.2 billion, a 63% year-over-year increase, contributing to a total semiconductor revenue of $9.2 billion [11][12] - The company has secured over $10 billion in orders for AI racks based on its XPUs, expecting AI semiconductor revenues to rise 66% year-over-year for the fourth quarter [12] - AVGO's infrastructure software segment, with revenues of $6.8 billion and a 93% gross margin, is a strong growth catalyst [14] Group 4: AVGO Challenges - AVGO anticipates a contraction in gross margin due to a higher mix of XPUs and wireless revenues, despite strong revenue growth [15] - The slow recovery in non-AI semiconductor revenues poses a concern, with projected growth in this segment expected to be low double digits [16] Group 5: Comparative Analysis - Over the past three months, CRDO and AVGO have gained 22.6% and 12% respectively, with CRDO trading at a higher forward price/sales ratio of 22.53X compared to AVGO's 18.82X [17][18] - Analysts have revised earnings estimates upward for both companies, with CRDO seeing a 2% increase in estimates [19][23] - Both companies are positioned to benefit from the growing AI-driven data center market, but CRDO offers more direct exposure to high-growth segments [24]