Core Insights - Credo Technology Group Holding Ltd. (CRDO) reported strong second-quarter fiscal 2026 results, driven by the rapid growth of its Active Electrical Cable (AEC) business and increasing traction with major hyperscale customers [1][2] Financial Performance - In the fiscal second quarter, CRDO achieved revenues of $268 million, reflecting a 20% sequential increase and a remarkable 272% year-over-year growth [2][11] - The company anticipates a 27% sequential revenue increase for the fiscal third quarter and projects fiscal 2026 revenues to grow over 170% year over year [6][11] Customer Base and Market Dynamics - Four hyperscalers contributed more than 10% each to total revenues, with a fifth hyperscaler beginning to generate initial revenues, indicating strong adoption of CRDO's AEC solutions [3][11] - The emergence of a fifth hyperscaler and strengthened customer forecasts mark a significant inflection point for the company [3][6] Product and Technology Advancements - AECs have become the standard for inter-rack connectivity, replacing optical connections up to 7 meters, offering up to 1,000 times more reliability and 50% lower power consumption compared to optical solutions [4] - CRDO's architecture is designed to meet the critical demands of AI clusters, focusing on reliability, signal integrity, latency, power efficiency, and total cost of ownership [5] Competitive Landscape - Broadcom and Marvell Technology are also making significant strides in the AI space, with Broadcom securing over $10 billion in orders for AI racks and Marvell reporting a 37% year-over-year revenue increase [8][10] - Marvell's acquisition of Celestial AI, which specializes in Photonic Fabric technology, is expected to enhance its capabilities in optical interconnects [10][12] Valuation and Market Performance - CRDO is currently trading at a forward 12-month Price/Sales ratio of 28.87, significantly higher than the Electronic-Semiconductors sector's multiple of 7.9 [13] - The company's shares have increased by 40.6% in the past month, outperforming the Electronics-Semiconductors industry's growth of 25.4% [14]

Core Viewpoint - Broadcom is positioned as a key player in the AI infrastructure market, with strong revenue visibility justifying its current stock valuation despite being elevated [1][2]. Financial Performance and Expectations - Broadcom will report its Q4 and fiscal year 2025 results on December 11, which could significantly influence 2026 expectations and share price [2]. - The stock is currently trading at 40.3 times forward earnings, indicating that much of the potential upside is already reflected in the price [2]. - The company anticipates Q4 revenue of nearly $17.4 billion, a 24% year-over-year increase, with semiconductor revenue expected to rise 30% to $10.7 billion and AI semiconductor revenue projected to surge 66% to $6.2 billion [14]. AI and XPU Adoption - Broadcom's custom accelerators (XPUs) are in high demand, with management forecasting AI revenue growth exceeding the estimated 50% to 60% year-over-year growth rate for fiscal 2025 [3]. - Each of Broadcom's three major hyperscaler clients is expected to deploy 1 million XPUs in AI clusters by 2027, indicating a multiyear adoption cycle [5]. - A $10 billion order for XPU-based AI racks from a fourth client is expected to begin volume shipments in Q3 of fiscal 2026 [6]. Partnerships and Market Position - Broadcom's partnership with Alphabet has been a significant growth catalyst, aiding in the development of Tensor Processing Units (TPUs) for AI applications [7]. - The company's open-source Ethernet-based networking solutions are being adopted by hyperscalers for AI clusters, providing alternatives to proprietary solutions [9][10]. Infrastructure Software Business - The infrastructure software segment now accounts for nearly 43% of Broadcom's total revenue, with strong demand from VMware's top customers for AI workloads [11]. - The transition of VMware's customers to deploy AI workloads is expected to take around two years, potentially leading to durable revenue streams for Broadcom [11]. Non-AI Business and Future Outlook - The non-AI chip business has remained flat, with expectations for modest improvement in Q4, although recovery may be gradual [12]. - Broadcom's adjusted EBITDA for Q4 is estimated to be 67%, with a significant backlog of $110 billion at the end of Q3, supporting future share price appreciation [14][17].