On October 12, Credo Technology Group Holding Ltd (NASDAQ:CRDO) unveiled a new cable for AI data centers. It uses light instead of electricity to send data, and it is designed to connect servers up to 50 meters apart. Credo says it uses about 30% less power than similar copper cables and weighs ten times less. Shipments start in 2027. Even so, the stock fell about 7% that day. The drop appeared to be part of a wider selloff in AI connectivity stocks rather than any weakness in the business itself. Credo’s new cable highlights its push to improve AI data center efficiency, but which other stocks stand out for their ability to generate returns on shareholder capital? Explore these 10 stocks with stronger ROE.
Why I Like Credo’s Approach
Credo is best known for copper cables, which are still its largest business. But it’s quickly adding optical products, which move data using light. In May, it bought DustPhotonics, a maker of the tiny optical chips at the heart of these products. Management now says its optical business reaches all the way to near-packaged optics, a technology similar to CPO that places optics right beside the chip. It expects optical sales to surpass $600 million this fiscal year.
What I like most is that Credo doesn’t need any single technology to win. It sells copper cables, optical parts, and chips that support CPO-style designs, and its new light cables join the lineup in 2027. So it can keep growing whether the industry moves to CPO quickly or slowly. Its products are also built around reliability, the same concern that has held CPO back. The company is positioning itself for multiple technology shifts, but where can investors with limited funds find stocks to start with? See our list of Top 10 Co-Packaged Optics (CPO) Stocks to Buy in 2026.
Growth Has Caught Up With the Valuation
Credo’s forward non-GAAP P/E of 31.45x is far below its 5-year average of 138.57x. That average is inflated by years when Credo earned very little, but it shows how fast profits have grown. The discount looks unusual when you see the EPS outlook. Analysts see earnings rising about 82% this fiscal year and 54% the next. That would bring the P/E down to about 20x by fiscal 2028. The balance sheet is also clean. Credo holds roughly $764 million in cash against just $26 million in debt. Based on the numbers, I think the price looks fair for one of the fastest-growing names in AI connectivity.
Hedge fund interest in Credo has jumped. Funds holding Credo rose from 59 in Q1 to 86 in Q2. The value of their stakes more than tripled from $1.9 billion to $5.9 billion.
The recent dip looks like a buying opportunity to me. Credo is growing fast, and its push into optics, including CPO-style designs, gives it room to keep growing for years.
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