The rapid expansion of AI is creating unprecedented demand for high-speed, energy-efficient connectivity inside data centers. Against this backdrop, Credo Technology Group Holding Ltd. CRDO recently announced the launch of the Short-Reach Micro-Emitter Optics (SRMO) Workstream within the Open Compute Project (OCP) Community. The initiative combines optical technology providers, connectivity specialists and a leading hyperscaler to establish specifications for a new class of high-speed data center interconnects.
With OCP approval targeted for 2027, the initiative is likely to drive broader adoption of micro-emitter optics. For Credo, the opportunity is likely to help shape an emerging connectivity ecosystem that could become increasingly important as AI infrastructure expands. Micro-emitter optics uses arrays of micron-scale light sources to transmit data across multiple optical channels simultaneously. Rather than pushing a limited number of channels to extremely high individual data rates, the technology distributes transmission across many parallel channels. Industry collaboration further strengthens Credo’s position. Initial participants include a leading hyperscaler and optical technology companies such as AFL, ams OSRAM, BizLink, Foxlink, Heraeus Covantics, SENKO and YOFC.
The SRMO Workstream aims to secure OCP specification approval in 2027. The proposed specification will address power consumption, efficiency, signaling, parallelism, module and connector footprints, link budgets and compliance. The SRMO initiative is likely to reinforce Credo's position in the broader AI connectivity market. The company already operates across high-speed copper and optical interconnects, optical components, digital signal processors, retimers and related connectivity solutions. If micro-emitter optics gains traction, Credo could benefit from demand for compatible optical interconnect products and technologies.
Can CRDO Maintain Its Edge as Optical Competition Grows?
Marvell Technology MRVL optical DSP, switching and broadband businesses remain strong, with 800G demand solid and 1.6T ramping rapidly, expected to accelerate in fiscal 2028. Customers are initially using copper for scale-up networks, but as AI clusters expand, copper’s limited reach and bandwidth are pushing them toward optical interconnects and dedicated UALink, ESUN and NVLink switches. It is therefore investing heavily in next-generation optical interconnect and switching technologies. Marvell continues to see strong demand across optical DSPs, broadband analog, DCI modules and switching, with each tracking toward a $1 billion annualized revenue run rate. The scale-up opportunity remains large, with NPO, CPO and purpose-built switches supporting future growth.
Astera Labs ALAB is benefiting from rising demand for high-speed connectivity as AI infrastructure shifts toward larger rack-scale systems. Taurus, CXL, UALink, optical and custom connectivity programs broaden the longer-term content opportunity. Management plans to deliver UALink-enabled Scorpio X-Series switches in 2027, alongside signal conditioning solutions for copper and optical links. Its optical roadmap targets high-density fiber attach and near-packaged optics production in 2027, followed by co-packaged optical engines in 2028 and beyond. Third-quarter revenue is expected to be $540-$560 million, implying roughly 40% sequential growth, driven by Scorpio X-Series, Aries PCIe 6 and Taurus 800G shipments.
CRDO’s Price Performance, Valuation and Estimates
CRDO’s shares have gained 39.6% year to date compared with the Electronics-Semiconductors industry’s growth of 27.5%.
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In terms of the forward 12-month price/sales ratio, CRDO is trading at 12.24, higher than the Electronics-Semiconductors industry’s multiple of 4.77.
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The Zacks Consensus Estimate for CRDO earnings for fiscal 2027 has been revised upward over the past 60 days.
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CRDO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).