Disclaimer: This is not financial or investment advice.

How to play AI growth with CRDO ( Credo )

What is Credo’s business – AI data centers require a lot of high speed data connectivity. Credo is a leader in that area. The company offers a variety of products, including optical devices and data networking chips, but its active electrical cables ( AECs ), are the biggest chunk of its business.

Growth outlook – The company has continued expanding its business with the largest cloud service providers helping Credo benefit from growing demand for AECs, placing the company on the trajectory for strong revenue growth and expanding margins in the coming years. J.P. Morgan analyst Joseph Cardoso initiated coverage on $CRDO with an Overweight rating and established a $165 stock target. The analyst predicts Credo will be able to grow its revenue at more than 50% a year and its earnings at more than 70% a year through 2028. Customers include Microsoft, Amazon.com, xAI, and Meta Platforms. Oracle and Google are potential future customers. “Given our expectation for solid improvement in FCF generation and an already healthy balance sheet, we would not rule out a greater appetite for capital allocation, which would represent upside to our outlook,” the analyst wrote. Last month, Credo shares rose after the company reported better-than-expected earnings results, citing strong demand from large technology companies.

About AECs – Credo invented the AEC, which is a copper-based cable used to attach AI servers to networking switches. AECs are more reliable and consume less power than optical cables and can be used for longer distances than traditional passive copper cables.

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Disclaimer: This is not financial or investment advice.

Key reasons for AMZN lagging the market

$AMZN – Amazon’s stock has been in a bit of a rut lately. Year-to-date, it’s up a modest 4.6%, significantly trailing the S&P 500’s 16.8% gain and most of its “Magnificent Seven” peers. This lack of momentum feels stark, especially after a post-earnings pop in late October. Some context on why the stock is lagging –

1. AI and Infrastructure Capex Overload: The company guided for ~$125 billion in capital expenditures for 2025—up over 40% from prior years—with most tied to AI builds. This has led to a cash crunch: free cash flow plunged in recent quarters, and AWS operating margins dipped to 32.9% in Q2 from 39.5% in Q1 due to higher depreciation, stock-based comp, and forex hits.

2. AWS Growth Lagging Competitors AWS remains Amazon’s profit powerhouse (17% of revenue but ~50% of operating income), but its growth has cooled to 17-20% year-over-year—below Microsoft’s Azure (39%) and Google Cloud (32%) in recent quarters. Q3 brought a rebound to 20% growth (the highest since late 2022), boosted by deals like the $38B, seven-year OpenAI pact for Nvidia GPUs. Still, the perception of Amazon playing catch-up in the AI arms race has fueled selling—especially as the broader tech sector rotates away from hyperscalers amid high valuations.

3. Regulatory Headwinds and Legal Bills Amazon’s facing a barrage of scrutiny that’s eroding confidence. In September, it settled a $2.5B FTC lawsuit over Prime practices, removing some overhang but highlighting ongoing antitrust risks. November brought fresh EU probes under the Digital Markets Act, potentially labeling AWS a “gatekeeper” and slapping on fines or compliance costs.

4. E-Commerce Pressures and Broader Market Sentiment The retail side (74% of revenue) grew a solid 10% in Q3, but it’s under fire from low-cost disruptors like Temu and Shein, who snag 50% of U.S. shoppers with dirt-cheap imports. Amazon’s “Haul” initiative to counter them has flopped so far, though potential tariffs could help. Add in tepid top-line guidance (Q3 missed Street estimates slightly) and a high P/E ratio (35x forward earnings), and the stock’s become a relative value trap versus peers.

Please consider becoming a subscriber. You will get an exclusive access to my watchlists here and my private discord channel where I share my real-time trades with you to trade along with me. I spent considerable time/effort each day in compiling the best of the best trading strategies.