We recently compiled a list of the 30 Best and Worst Data Center Stocks. In this article, we are going to take a look at where Credo Technology Group Holding Ltd (NASDAQ:CRDO) stands against the other data center stocks.

We believe data centers are currently experiencing a remarkable growth phase as the demand for digital services, cloud computing, and broader GenAI applications increases significantly. In the hyperscale and colocation segments, an estimated 10 GW is projected to commence globally in 2025 (according to JLL Global Outlook). Market intelligence firm Statista forecasts the global data center market to reach $624 billion in 2029, up from $452 billion in 2025, with a CAGR of 8.4%. Meanwhile, a report by Boston Consulting Group (BCG) estimates that to meet the global demand for computing power, leading data center players will need to invest a staggering $1.8 trillion from 2024 to 2030. In essence, it's a juggernaut poised to reshape how the world consumes and processes information.

There has already been substantial capital investment over the last 3-4 years, transforming the data center industry landscape. Additionally, merger and acquisition activity has surged, with many well-known players now privatized. For instance, three major deals occurred in 2021: KKR and Global Infrastructure Partners acquired CyrusOne for $15 billion, American Tower acquired Coresite for $10 billion, and Blackstone acquired QTS for $10 billion. Later, Switch Inc. was acquired for $11 billion by DigitalBridge and IFM in 2022. These deals and their valuations only underscore the future value of data center assets.

In exploring investment opportunities for this article, we also examined some smaller private operators with intriguing business models, capitalizing on the growing demand for digital infrastructure. One such company is LightEdge, which operates 14 data center locations across the U.S. with a capacity of 30 MW. They offer customized solutions and services, including colocation, hybrid and edge cloud, and managed services. Another notable player is Vantage Data Centers, a private operator owned by DigitalBridge and other investors. Vantage operates in 21 markets worldwide, boasting 23 million square feet of space and 2.6 GW of power.

Flexential is another prominent name, providing tailored hybrid IT solutions through its FlexAnywhere platform. This platform integrates colocation, cloud, connectivity, data protection, and managed and professional services, across three million square feet of data center space in 19 highly connected markets. A recent addition to the emerging data center companies is Fleet Data Centers, launched by Tract Capital at the beginning of 2025. This company aims to develop mega-scale data center campuses with capacities of 500 MW or more, specifically designed for single-user customers. Tract Capital, the founder, is a data center land acquisition and development company led by an experienced team of data center experts.

Beyond our typical U.S. focus, we discovered an interesting Norwegian company, Green Mountain Data Centers. They operate four data centers across Norway and the UK, all running on 100% renewable energy. This small player exemplifies the direction the world should take.

Our Methodology

To identify the 30 best and worst stocks, we conducted extensive research to compile a list of U.S.-listed companies. Our focus included pure-play data center companies and those with significant revenue exposure to this market, or companies critical to the data center sector. Alongside market leaders, we aimed to feature smaller and lesser-known companies, without any market capitalization criteria. It's important to note that the 'worst stock' label in the title is based purely on the potential share price downside from current levels and does not reflect the fundamental quality of the company. Ultimately, the stocks were ranked in ascending order of their upside potential, with the stock having the highest upside potential ranked at the top.

Note: all pricing data is as of market close on January 27.

At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

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Credo Technology Group Holding Ltd (NASDAQ:CRDO)

Upside Potential: 35%

Number of hedge funds: 30

Credo Technology Group Holding Ltd (NASDAQ:CRDO) is a recent addition to the stock market, having gone public in 2022. The company is renowned for providing innovative, secure, high-speed connectivity solutions that enhance power and cost efficiency in the infrastructure market. Their primary products include active electrical cables (AECs), optical digital signal processors (DSPs), line card retimers, SerDes chiplets, and SerDes IP licenses, all of which enable high-speed connectivity within data centers.

Credo Technology Group Holding Ltd (NASDAQ:CRDO)’s management believes that AI cluster architectures are rapidly evolving due to advancements in processing, cooling, and power sourcing. These advancements are making clusters increasingly dense and scalable, creating significant opportunities for high-speed connectivity solutions to prevent service disruptions. Management has anticipated an 'inflection point' in its revenue and business momentum for several quarters and announced reaching this milestone in the second quarter of 2025, which led to a strong rally in the share price in 2024. The CEO highlighted:

“While we're proud of our achievements, we are also optimistic about the future of our AEC business. We believe that we are still in the early stages of widespread market adoption and we are well positioned as the market leader. AI driven demand for high-speed power efficient and reliable connectivity is accelerating. I am pleased to share that the turning point has arrived, and we are experiencing even greater demand than initially projected.”

The stock received a number of rating and target price upgrades following strong Q3 earnings and positive management commentary. Immediately after the December results announcement, a Bank of America analyst double upgraded Credo Technology Group Holding Ltd (NASDAQ:CRDO) stock from Underperform to Buy. The analyst’s positive investment thesis is based on the company’s transition towards a more profitable earnings growth model and the multi-year adoption cycle for its AEC product. However, he also highlighted the stock's premium valuation and intensifying competition in the AEC market as potential risks to the upside. The stock has surged by an impressive 274% since January 2024 (as per closing prices on January 26th, 2025), leading to a cautious market outlook on further upside.

Overall CRDO ranks 8th on our list of the best and worst data center stocks to buy. 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 timeframe. 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.