Shares of Credo Technology Group (CRDO +18.73%) rose sharply on Tuesday after the provider of high-performance connectivity solutions for artificial intelligence (AI) data centers made a game-changing acquisition.
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A smart buy
Credo struck a deal to acquire DustPhotonics, a leading developer of microchips that use optical components to transmit data via light rather than electricity.
DustPhotonics integrates multiple optical functions onto a single chip, thereby improving manufacturing yields, increasing reliability, and reducing costs.
“Combining forces with DustPhotonics marks a defining step in Credo’s strategy to lead across the full spectrum of AI connectivity,” Credo CEO William Brennan said in a press release. “We’ve built a strong position in high-speed electrical solutions, and this move decisively expands that leadership into silicon photonics.”
Today’s Change
(18.73%) $25.16
Current Price
$159.52
Key Data Points
Market Cap
$25B
Day’s Range
$149.00 – $163.68
52wk Range
$33.04 – $213.80
Volume
19M
Avg Vol
7.1M
Gross Margin
67.83%
Under the terms of the agreement, Credo would purchase DustPhotonics for $750 million in cash and 0.92 million shares of its stock, plus an additional 3.21 million shares if certain financial milestones are achieved.
The deal is projected to close in the second quarter, subject to regulatory approvals. Credo expects the acquisition to add to its adjusted earnings per share beginning in fiscal 2027.
Establishing a beachhead in a booming market
Acquiring DustPhotonics would strengthen Credo’s position within the rapidly expanding global optical industry. DustPhotonics is a leader in a segment of this market that will approach $6 billion by 2030, according to research firm LightCounting.
For its part, Credo sees its optical revenue growing to more than $500 million in fiscal 2027.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
