10:53 AM EST, 12/03/2024 (MT Newswires) -- Credo Technology's ( CRDO ) outlook for H2 fiscal 2025 is strong due to artificial intelligence growth at Amazon Web Services, its key customer as well as investor, BofA Securities said in a note on Tuesday.

The company's product, Active Electrical Cable, is expected to see significant adoption in AI clusters and the growth trajectory will continue with the broadening customer base, according to the note.

"Opex is expected to grow at less than 50% of sales growth over the next few years with gross margin generally staying resilient, suggesting significant opex leverage," the firm added.

BofA said that the key risks to Credo's growth include its premium valuation, potential margin volatility due to a reduced mix of high-margin intellectual property sales, and intense competition in the AEC market from rivals like Marvell ( MRVL ) and Broadcom ( AVGO ) .

The brokerage double upgraded its rating on Credo's stock to buy from underperform and raised the price objective to $80 from $27.

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