Brown Capital Management, an investment management company, released its first quarter 2026 investor letter for “The Brown Capital Management Small Company Fund”. A copy of the letter can be downloaded here. In the first quarter of 2026, the Small Company Fund (Investor shares) fell 19.78%, significantly lagging the Russell 2000 Growth index’s 2.81% decline. Worsened market conditions due to the Iran war, driving the oil price spike and increased volatility in equities. Despite stabilization in the performance as the quarter progressed, early declines and weakness in large positions significantly impacted the Fund’s performance. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its first-quarter 2026 investor letter, The Brown Capital Management Small Company Fund highlighted Credo Technology Group Holding Ltd (NASDAQ:CRDO). Credo Technology Group Holding Ltd (NASDAQ:CRDO) is a US-based semiconductor company that provides high-speed connectivity solutions for optical and electrical Ethernet and PCIe applications. On June 23, 2026, Credo Technology Group Holding Ltd (NASDAQ:CRDO) closed at $272.01 per share. One-month return of Credo Technology Group Holding Ltd (NASDAQ:CRDO) was 22.95%, and its shares gained 195.02% over the past 52 weeks. Credo Technology Group Holding Ltd (NASDAQ:CRDO) has a market capitalization of $50.72 billion.
The Brown Capital Management Small Company Fund stated the following regarding Credo Technology Group Holding Ltd (NASDAQ:CRDO) in its Q1 2026 investor letter:
“We added four companies to the Small Company Fund in the first quarter of 2026—Credo Technology Group Holding Ltd (NASDAQ:CRDO), Krystal Biotech (KRYS), SiTime (SITM) and Xpel (XPEL). Credo Technology is positioned at the center of the buildout for AI data centers. The company provides critical high-speed connectivity solutions—effectively the plumbing of AI and cloud infrastructure—through its leadership in Active Electrical Cables (AECs), which enable high-bandwidth, low-latency and energy-efficient data transfer within hyperscale environments. As AI workloads accelerate, connectivity demand is growing even faster than compute, directly tying Credo’s revenue opportunity to the rapid expansion of hyperscaler infrastructure spending. With approximately 80% share in the AEC market it pioneered, Credo benefits from a strong competitive position, reinforced by its fully integrated, end-to-end solution spanning silicon through finished cable. This model drives faster time-to-market, lower system complexity and superior reliability versus more fragmented competitor offerings.
Our investment thesis is supported by multiple durable growth drivers, including a structural AI tailwind, expanding product optionality and operating leverage. Credo is a key beneficiary of the ongoing AI arms race and infrastructure build out among hyperscalers such as Amazon, Microsoft and Meta. Beyond AECs, Credo is expanding into other connectors, significantly increasing its total addressable market. In fiscal year 2025 (ended April 30), Credo generated $437 million in revenue. Over the next few years, we expect revenue growth of 30% to 50% a year. Financially, Credo demonstrates unit economics that we find attractive, with gross margins above 65% and improving operating efficiency as scale increases. Credo achieved 8.5% GAAP operating margin in fiscal year 2025 which we think should rise to 29% GAAP fiscal year 2026. While customer concentration—particularly with Amazon and Microsoft—and emerging competition from players like Astera Labs present risks, Credo’s advantages in integration, cost and performance are expected to sustain its leadership. In conclusion, the company represents a compelling way to gain exposure to the foundational layer of AI infrastructure with substantial long-term growth potential.”
Credo Technology Group Holding Ltd (NASDAQ:CRDO) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 59 hedge fund portfolios held Credo Technology Group Holding Ltd (NASDAQ:CRDO) at the end of the first quarter, compared to 69 in the previous quarter. While we acknowledge the risk and potential of Credo Technology Group Holding Ltd (NASDAQ:CRDO) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Credo Technology Group Holding Ltd (NASDAQ:CRDO) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Credo Technology Group Holding Ltd (NASDAQ:CRDO) and shared the list of AI stocks analysts are watching. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
