Astera Labs vs Credo: Which AI Connectivity Stock Has More Upside?

Key Takeaways:

• Astera Labs (ALAB) and Credo (CRDO) both make chips that keep data moving fast between the components inside AI servers, and both are growing revenue at triple-digit rates.
• Astera trades at a much richer price relative to its earnings than Credo does, meaning ALAB needs bigger, more consistent growth to justify its valuation.
• Both companies depend on a handful of massive customers, and that concentration, plus the risk those customers eventually design their own chips, is the biggest threat to either stock.

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Most people have never heard of Astera Labs (ALAB) or Credo (CRDO). That is fair. Neither company sells anything you would recognize.

But if you have followed the AI trade, you know that Nvidia chips, custom AI chips, and memory all have to move enormous amounts of data back and forth, constantly, inside a data center.

Astera Labs and Credo make the small, unglamorous components that keep that data flowing quickly and reliably. Think of them as the traffic controllers inside an AI server rack.

Both stocks have exploded higher over the past year. Astera Labs is up 326%, and Credo is up 177%. Investors are betting that the AI buildout will keep needing more of what these two companies sell. The real question is whether that bet still makes sense at today’s prices.

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An Overview of Astera Labs and Credo

Astera Labs makes chips called retimers and switches that clean up and route signals traveling between processors, memory, and networking gear.

Its newer Scorpio switches now handle traffic across entire AI racks, and management said on a recent investor call that Scorpio should become the company’s largest product line by the end of the year, according to comments from CFO Desmond Lynch at the Evercore Global TMT Conference on June 3.

Astera Labs Revenue, Net Income and FCF Comparison (TIKR)

According to data compiled by TIKR.com, Astera’s revenue is projected to jump from about $852 million last year to roughly $1.5 billion this year, then keep climbing toward $2.8 billion by 2028. Net income is expected to grow even faster than sales.

Credo built its business on active electrical cables, a copper-based method for connecting GPUs to network switches. CEO Bill Brennan told investors at the Bank of America Global Technology Conference on June 4 that the debate over copper versus optical connections is over.

“It’s going to be a heterogeneous world,” he said, meaning both technologies will keep growing side by side rather than one replacing the other.

Credo Revenue, Net Income and FCF Comparison (TIKR)

Credo’s growth looks even steeper on paper. Revenue hit $1.3 billion in its most recent fiscal year and is forecast to reach $2.4 billion this year, with TIKR’s estimates showing a path toward $6.8 billion by 2031.

Brennan said Credo’s newer optical transceiver business, called ZF Optics, alone could grow past $600 million next year, roughly a quarter of total revenue.

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The Risk Hiding In Both Stocks

Both companies lean heavily on just a few giant customers. Astera has said that much of its growth comes from one lead customer, though it is diversifying with hyperscaler this year. Credo has similarly relied on a small number of major buyers, including reported early work with xAI on its longer-cable products.

That concentration cuts both ways. It shows these are trusted, deeply embedded suppliers to the biggest AI spenders. But it also means one customer shifting its order or building the part in-house could hurt results fast.

Moreover, hyperscalers like Amazon, Google and Microsoft have shown they are willing to design their own custom silicon rather than buy off-the-shelf.

If that appetite extends to connectivity chips, both Astera and Credo could lose share over time. Neither company has been immune to this worry, which is one reason both stocks swing so hard on earnings days.

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Which Stock Offers The Better Balance

Here is where the two stocks split apart.

ALAB Stock Valuation Model (TIKR)

Astera trades around 115 times its expected earnings over the next year, based on TIKR data. That multiple has swung wildly, from below 50 times back in March to above 140 times in recent weeks.

Credo, meanwhile, trades closer to 40 times forward earnings, a far cheaper multiple relative to its own growth rate.

Put simply, Astera’s stock price already assumes near-flawless execution for years to come. Credo’s price leaves a bit more room for error.

Valuation models on TIKR peg Astera’s midpoint target price at $842.75, implying an 18.5% annualized return.

ALAB Stock Valuation Model (TIKR)

Credo’s midpoint target sits at $687.29, implying a 22.5% annualized return, largely because it starts from a lower valuation today.

Both companies sit at the center of a real, growing need. But Credo currently offers a cheaper entry point for similar or faster projected growth, giving it a better balance of risk and reward today.

Astera remains the higher-quality story with a broader product lineup, but its price already reflects considerable optimism.

Investors comfortable paying up for that story may still prefer Astera. Those wanting more cushion may find Credo the more reasonable bet right now.

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How Much Upside Does Astera Stock Have From Here?

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!