Damnang
· Damnang’s Substack
· April 15, 2026 at 03:26
· ⏱ 8 min read
| Read on Substack ↗
Summary
Credo Technology's technical moat—built on proprietary SerDes IP and the AEC product category it created—positions it uniquely for the optical transition in AI data centers. The DustPhotonics acquisition completes vertical integration from copper to optical, but the market still misprices the stock, which rebounded 67% from its March low after the deal was announced.
•FY26 Q3 revenue hit $407M, up 201% YoY, yet the stock cratered 60% from $213 to $80s on a 'copper company' narrative.
•Credo's core advantage is custom SerDes IP (28Gbps to 224Gbps) with 500+ engineers focused solely on it.
•Its AEC (Active Electrical Cable) product dominates the market, offering 75% less bulk and up to 1,000x higher reliability (ZeroFlap) vs legacy interconnects.
•Mature process node fabrication yields 67–68% non-GAAP gross margins and avoids leading-edge fab bottlenecks.
•The DustPhotonics acquisition ($750M) adds Silicon Photonics PIC in-house, completing a portfolio covering chip-to-memory to long-haul data center links.
•NVIDIA's $4B strategic investments in Lumentum and Coherent fueled the 'copper-era ending' narrative, but Credo's optical DSP and AEC coexist as complementary technologies.
The article details Credo's technical moat (SerDes IP, AEC dominance, ZeroFlap reliability) and argues the DustPhotonics acquisition completes vertical integration for the optical transition. This val
The article details Credo's technical moat (SerDes IP, AEC dominance, ZeroFlap reliability) and argues the DustPhotonics acquisition completes vertical integration for the optical transition. This validates the company's structural advantages and suggests upside if the market re-rates it beyond the 'copper company' label.
Risk: Valuation remains elevated (beta 2.72, prior 100x P/E); execution risk on integrating DustPhotonics and maintaining margins as competition intensifies.
The article notes that NVIDIA made $4B in strategic investments in Lumentum and Coherent, signaling that optical interconnect companies are direct beneficiaries of AI data center buildouts. This posit
The article notes that NVIDIA made $4B in strategic investments in Lumentum and Coherent, signaling that optical interconnect companies are direct beneficiaries of AI data center buildouts. This positions Lumentum as a key supplier in the shift toward optical links that Credo is also targeting.
Risk: Dependence on hyperscaler capex cycles; potential competition from integrated solutions like Credo's new PIC capability.
Coherent is explicitly named alongside Lumentum as a recipient of NVIDIA's $4B investment, reinforcing its role in the optical interconnect ecosystem for AI. The article's framing of the 'copper era e
Coherent is explicitly named alongside Lumentum as a recipient of NVIDIA's $4B investment, reinforcing its role in the optical interconnect ecosystem for AI. The article's framing of the 'copper era ending' underscores demand for optical solutions, benefiting Coherent's transceiver and photonics portfolio.
Risk: Integration of large acquisitions (e.g., II-VI) still ongoing; potential market share loss if Credo's co-packaged optics (CPO) gains traction.
This newsletter, published April 15, 2026,
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