CRDO's growth potential (85% FY27) and product pipeline outweigh its risks (customer concentration, cash burn), making it a high-risk/high-reward buy.

Okay, now we can move on to the third stock, which is a less well-known company in the semiconductor industry. Its market value is less than $50 billion. Much like Broadcom, it announced its profits and the market punished it, and rightly so , wasn't it?

I think that for Broadcom, for example, the reason for penalizing it is logical. I wouldn't be too pessimistic about the stock, but I can understand why the market is punishing it. The same applies to this stock.

Therefore, the stock I took a closer look at is " Crido", and its symbol is CRDO. They manufacture high-speed chips and communication cables that help connect graphics processing units, adapters, and memory within AI data centers .

Therefore , they largely represent that network solution. They have major partners, with five of the world’s largest data center operators working with them .

Now, if we look at the numbers, the revenue figures were insane. Revenues reached $479 million, an increase of 115% year-on-year. It has increased by 10% on a quarterly basis, so you will continue to see this growth.

Most importantly, the guidance for the next quarter was $525 million , which would represent nearly 100% year-over-year growth once again. For the entire year, and because they have just finished the first quarter, they are estimating annual growth of at least 85% for fiscal year 2027.

So, there is tremendous growth. As we will discuss, they have a diverse range of products in all areas, and that is what really excites me. But I really want to talk a little about why the market punished them in the first place.

One of the big things is customer focus. Their four largest customers account for about 80% of their total revenue, right

Unfortunately, as we saw with Lam Research, and as we saw with Broadcom, only a limited number of customers need and purchase the products offered by Credo and all these semiconductor companies.

Therefore, I think this customer focus is to be expected in this market.

The other thing we saw was that the company had about $1.4 billion in cash. Fortunately, they have no debt, but that amount has decreased by more than 50% this quarter. The market is feeling scared.

Do you invest a lot in research and development? Do you make too many acquisitions? One of the things we liked about you is your strong balance sheet. Now, despite having no debts, you have cut your cash flow in half.

They made a one-off acquisition here, related to the field of optics, and wanted to pay in cash rather than borrow. It's a one-time thing, I don't consider it a big problem. It is clearly a warning sign that calls for close monitoring.

Is this budget, which was very strong, getting weaker? Again, this is a warning sign at the moment, and not necessarily something that worries me too much.

The other thing is that we saw gross profit margins affected slightly. Gross profit margins fell to around 64%, but they expect profit margins for the rest of the year to be between 67% and 69%.

The market has the right to punish you, because research and development has become a major part of this artificial intelligence story. The fear of any decline in the margins is seen as a weakness.

It is also seen as possibly someone acquiring a market share. This makes us see that it is now turning into a price war instead of a supply and demand war.

So, these are some of the main reasons why the stock suffered when earnings were announced. After trading hours, the stock fell by 20%. Now, let me explain why I'm so excited about this company.

First of all, as I mentioned, for this year, which is fiscal year 2027, they are already estimating annual growth of around 85%. Now, what makes me most excited is actually next year , fiscal year 2028.

Because in fiscal year 2028 they have many new products coming. They have silicon photonics designs that will come into play and increase in fiscal year 2028. Things like NPL, which stands for near- beam optics, are very exciting.

They also have Active LED Cables, LLCs, planned for fiscal year 2028. Then there are lots of memory solutions like Omni Connect, which they say will also start generating revenue in fiscal year 2028 .

So you have a huge basket of different sectors in the semiconductor industry, all of which are experiencing supply constraints in one way or another. And you're telling me that even before that basket hits the market, it will give me 85% annual growth this year alone.

So, this is a high-risk, high-reward company, Rachel. I like it, but the competition is clearly real. Regardless, the opportunity for growth for me far outweighs many of those risks.

If this company isn't familiar to you, this is a business that has seen a significant shift in its revenues over the past few years. I mean, they've gone from about $200 million in annual revenue a few years ago to more than $1 billion now on a cumulative basis.

We see that management has raised its revenue forecast to more than 80% for next year. So, this is a company that has experienced a very rapid rise, and much of that is due to the nature of its business and the customers it serves who operate in this restrictive, high-demand environment.

So, they feed off each other, but it is very important to understand that this is not a company that has been growing at this pace until very recently.

Now, as you know, Jose pointed out the concentration of customers there. Their first customer represents about 30% of their revenue. And I think, as you know, Jose, you made a great point regarding the dynamics of customer concentration in this area .

It's a risk we talk about a lot. I think it's really important to keep that in mind and include it in your thesis if you're investing in any of these companies we're talking about today or any of their competitors.

Many, but not all, of them are profitable and well-protected companies that are driving this demand, and they are the ones buying this capacity from companies like Credo, Broadcom and Lam.

This creates a dynamic where there is a concentration of customers, but these are also the big players in the field. So, this is something I think you should be comfortable with if you're putting money into these types of businesses.

But I think Credo is an interesting company . I agree that it involves higher risks, you know, and potentially higher returns. But I also think it's probably the choice on today's list that's really experiencing some of the physical bottlenecks we're seeing in the AI industry , you know, right now.

Credo takes advantage of the fact that once you have all these graphics processing units in one set, getting them to talk to each other fast enough is a big engineering problem, and this is something they help solve.

So, these are the thoughts that came to me when looking at this work today. She is definitely on my watchlist.