We recently published a list of 10 Best Mid Cap AI Stocks to Buy Now. In this article, we are going to take a look at where Credo Technology Group Holding Ltd (NASDAQ:CRDO) stands against other best mid cap AI stocks to buy now.
In 2025, the technology companies continue to focus on developing AI platforms that meet their enterprise customers’ needs for optimized performance, profitability and security, says Morgan Stanley. In doing so, they have been partnering throughout the AI ecosystem of chips companies, hyperscalers, large language models, and data and software companies while grappling with the US trade policy unknowns and resource constraints. The firm believes that the top trends in new AI frontiers and the emphasis on enterprises consist of AI reasoning, cloud migrations, custom silicon, systems to measure AI efficacy, and developing an agentic AI future.
Key Themes Likely to Shape the Industry
Morgan Stanley, while quoting executives from companies designing and making chips, stated that AI reasoning happens to be one of the biggest drivers of higher compute demand, and thus, semiconductors. Notably, AI reasoning goes over and above the basic understanding and into advanced learning and decision-making, which needs additional compute for pre-training, post-training, and inference. As per Marco Lagos Morales (Head of U.S. Semiconductor Investment Banking at Morgan Stanley), for chip companies, customer demand remains in the breadth of AI workloads for programmable infrastructure.
The next theme revolves around LLMs seeing potential in AI reasoning for enterprises. Morgan Stanley highlighted that companies that have developed the world’s biggest LLMs focus on using the most effective chips and building the best software to provide AI services that become critical for companies and consumers. As per LLM executives, while the early use cases for LLMs revolved around content generation, summarization, and classification, the biggest untapped potential is in AI reasoning for the enterprise data.
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Software Companies Focusing on Agentic AI, Says Morgan Stanley
The software executives mentioned regarding their current use of AI for the purposes of productivity gains in marketing and engineering and their longer-term prospects in a bid to gain market share in an agentic computing future. Morgan Stanley further highlighted that such companies continue to aim to create large systems deploying AI agents to make decisions, take autonomous actions, and adapt to dynamic environments for real-world applications throughout various industries. According to Brittany Skoda, Global Head of Software Banking, software companies continue to compete to create larger operating systems that harness machine learning, natural language processing, LLMs, GenAI, and decision-making algorithms to move towards an agentic future.
Our Methodology
To list the 10 Best Mid Cap AI Stocks to Buy Now, we used a screener and sifted through several media reports to shortlist the mid-cap companies catering to the AI industry. Next, we selected the stocks that are the most popular among hedge funds. We have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An engineer in a cleanroom testing and tweaking an integrated circuit.
Credo Technology Group Holding Ltd (NASDAQ:CRDO)
Market Cap as of March 27: $7.1 billion
Number of Hedge Fund Holders: 43
Credo Technology Group Holding Ltd (NASDAQ:CRDO) plays a critical role in the AI infrastructure ecosystem. The company’s high-speed, low-latency connectivity solutions remain critical for helping the data transfer needs of AI workloads in data centers, IoT devices, as well as AI-powered industrial applications. The company remains well-placed to capture a significant share of the dynamic AI infrastructure market. Credo Technology Group Holding Ltd (NASDAQ:CRDO)’s AEC products continue to gain traction in AI cluster deployments, providing power-efficient solutions that remain important for large-scale AI operations. With the acceleration of AI adoption throughout various industries, the demand for high-performance, energy-efficient connectivity solutions is projected to increase.
With more companies making investments in AI infrastructure, Credo Technology Group Holding Ltd (NASDAQ:CRDO) possesses the potential to improve the customer base and enhance the market share. Its strong emphasis on innovation and its capability to offer products meeting the critical needs of AI applications can help it develop a strong and defensible position. The broader AI industry’s growth is expected to fuel strong demand for Credo Technology Group Holding Ltd (NASDAQ:CRDO)’s high-speed connectivity solutions, mainly as AI applications become more data-intensive, demand quicker communication between AI hardware systems, and need low-latency processing.
TimesSquare Capital Management, an equity investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that closely tie to increasing shares of corporate IT budgets. Credo Technology Group Holding Ltd (NASDAQ:CRDO), a supplier of high-speed connectivity solutions, surged ahead by 51%. The company reported inline April quarter results and management’s July quarter guidance met expectations; AI spending is a growth driver.”
Overall, CRDO ranks 4th on our list of best mid cap AI stocks to buy now. While we acknowledge the potential of CRDO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than CRDO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
