We recently compiled a list of the 10 Most Oversold Data Center Stocks to Buy According to Analysts. In this article, we are going to take a look at where Credo Technology Group Holding Ltd (NASDAQ:CRDO) stands against the other oversold data center stocks.
In an AI-driven world, data centers have become more critical than ever. While many people have heard of data centers, few fully understand what they entail. Simply put, a data center is a physical facility that houses an organization’s digital infrastructure, including servers, storage systems, and networking equipment. These facilities provide the computing power necessary for IT systems to function, serving as the backbone of modern digital infrastructure. They are essential to powering cloud computing, AI applications, and enterprise IT services.
With the rapid expansion of AI and high-performance computing, data centers have experienced exponential growth, a trend expected to continue for years. According to a February 5 report by the Dell’Oro Group, global annual data center capital expenditure (capex) is projected to exceed $1 trillion by 2029. Despite ongoing concerns about high power consumption, investment in AI infrastructure remains on a strong upward trajectory. Baron Fung, Senior Research Director at Dell’Oro Group, emphasizes this point:
“While AI spending has yet to yield the expected returns and efficiency improvements, long-term growth remains assured, driven by hyperscalers’ multi-year capex cycles and government initiatives such as the $500 billion Stargate Project. Although recent advancements in AI model training efficiency from DeepSeek have been disruptive, efforts to enhance efficiency and reduce the total cost of ownership in AI data centers have been underway for some time. Key areas of focus include advancements in accelerated computing through GPUs and custom accelerators, large language model (LLM) optimizations, and next-generation rack-scale and network infrastructure—all essential for enabling sustainable growth from both cost and power perspectives.”
A key challenge facing the industry was highlighted in KPMG’s “Data Center Supply Chain” report published in November 2024. The report warns of the sector’s heavy reliance on a small group of suppliers and contractors, which, despite improvements in procurement and operations, poses risks to capacity expansion, costs, innovation, and resilience—especially as demand accelerates. KPMG cautions that failure to address these vulnerabilities could destabilize the ecosystem. To mitigate these risks, the report recommends diversifying the supply chain by encouraging new market entrants and reducing dependence on a handful of general, mechanical, and electrical subcontractors.
In summary, while the data center industry is fundamental to technological progress, it is still evolving and adapting to shifting economic and demand dynamics. There is enough scope for more players to offer new and innovative solutions to support the technological advancements. The surging demand for data center facilities has attracted substantial investments from private equity and infrastructure funds, reinforcing expectations of resilient long-term growth. As a result, the data center sector remains a highly attractive space for investors.
Our Methodology
To determine the 10 most year-to-date (YTD) oversold data center stocks to Buy, we conducted in-depth research to compile a list of U.S.-listed data center companies. Our process involved analyzing relevant exchange-traded funds (ETFs), research reports, and proprietary databases to identify key industry players. We then calculated YTD returns for all identified companies and shortlisted the 10 worst-performing stocks. These were then ranked based on their potential upside, with the highest-upside stock at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on February 24.
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)
YTD returns: -10%
Potential Upside: 39%
Number of Hedge Fund Holders: 43
Credo Technology Group Holding Ltd (NASDAQ:CRDO) is a provider of advanced connectivity solutions for high-performance data centers, telecommunications, and cloud infrastructure. The company specializes in semiconductor-based solutions that address the increasing demand for high-speed data transmission, with a focus on silicon interconnects. It sells its products to hyperscalers, original equipment manufacturers (OEMs), original design manufacturers (ODMs) and optical module manufacturers, as well as to companies in the enterprise and HPC markets.
Credo Technology Group Holding Ltd (NASDAQ:CRDO) shares have declined approximately 10% in 2025, though this appears to be a case of profit-taking following the stock’s impressive 245% rally in 2024. During the DeepSeek-driven market sell-off, the stock dropped 30% but later managed to recover a portion of those losses, mirroring the trend seen across many AI-related stocks.
According to Business Insider, Mizuho Securities analyst Vijay Rakesh reaffirmed his Buy rating on the stock in a February 13 update, maintaining a price target of $90. Earlier, on January 8, Stifel analyst Tore Svanberg also reiterated a Buy rating and raised his price target from $80 to $85. Analyst sentiment remains bullish on Credo Technology Group Holding Ltd. (NASDAQ:CRDO), with a consensus view suggesting a potential upside of approximately 40%.
Overall CRDO ranks 4th on our list of the most oversold data center stocks according to analysts. While we acknowledge the potential of CRDO as an investment, our conviction lies in the belief that 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 CRDO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
