Growing demand for connectivity solutions as artificial intelligence adoption accelerates should benefit this lesser-known semiconductor name, according to Goldman Sachs. Analyst Toshiya Hari lifted his price target on Credo Technology to $18 from $16 a share, equal to 21% upside from Thursday’s close. The company makes active electrical cables (AECs), and bandwidth solutions powering sophisticated AI models. CRDO YTD mountain Shares have gained about 12% this year. “While the exact timing of customer ramps, particularly in the AEC business, remains uncertain, we continue to view the medium- to long-term opportunity across both traditional and AI compute as compelling,” he wrote. The higher price target at Goldman comes after AI chipmaker Nvidia ‘s second consecutive show-stopping quarterly report . Credo also posted quarterly results this week that topped expectations, and raised revenue guidance as demand for high-speed connectivity solutions accelerates. Goldman and others on Wall Street believe that Microsoft, Credo’s largest customer, has already begun building out its infrastructure. Hari expects Credo’s “second hyperscale customer … to enter a steep ramp in FY2025.” Signs of a recovery in China and strong gross margins also bode well for Credo, Hari said, adding that higher revenues and operating expense leverage will further benefit operating margins in the medium-term. Along with reiterating Goldman’s buy rating, Hari lifted revenue and adjusted EBITDA estimates by 5% and 4% over the next two years, respectively. But Goldman isn’t the only firm expecting more upside ahead for Credo. Needham analyst Quinn Bolton cited AEC growth and “signs of life” within Credo’s optical digital signal processor segments as potential catalysts for the stock. CRDO 5D mountain Credo Technology shares this week. Bolton lifted his price target to $20 from $17 in a Friday note, equivalent to more than 34% upside from Thursday’s close. “Leveraging its competitive advantage, we expect Credo to meaningfully outgrow its data center [total addressable market] over the next three years and be one of the fastest revenue growth stories in semiconductors over this period,” Bolton wrote. — CNBC’s Michael Bloom contributed reporting
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