Artificial intelligence infrastructure spending is reshaping the semiconductor landscape, pushing investors to weigh competing strategies among chip-adjacent companies.
Arm Holdings (NASDAQ: ARM) and Credo Technology Group (NASDAQ: CRDO) represent two distinct approaches to capitalizing on the AI buildout sweeping through data centers globally.
Arm earns royalties every time a chip uses its architecture, while Credo builds the high-speed connectivity that links those chips inside AI data centers.
Arm’s technology has been deployed in more than 350 billion chips, powering over 99% of the world’s smartphones while expanding into edge devices and AI-enabled supercomputers.
That licensing model allows Arm to earn royalties on every chip sold using its architecture, creating a recurring and high-margin revenue stream with remarkable consistency.
In fiscal year 2026, Arm’s revenue reached nearly $4.9 billion, representing growth of approximately 22.8% compared to the prior year.
The company reported net income of roughly $904.0 million during that same fiscal period, underscoring the profitability of its royalty-driven business model.
Credo Technology Group delivered far more explosive growth figures, with fiscal year 2026 revenue reaching nearly $1.3 billion, a surge of approximately 205.7% from the previous year.
Credo posted net income of close to $472.3 million in fiscal 2026, resulting in a net margin of roughly 35.4%, a figure that reflects intense hyperscaler demand for high-speed connectivity.
Valuation metrics reveal a significant gap between the two companies, with Arm trading at a Forward P/E of 102.9x and a P/S ratio of 49.8x.
Credo trades at a considerably more modest Forward P/E of 26.5x and a P/S ratio of 23.2x, making it the more attractively priced of the two on those measures.
Customer concentration remains the one material risk worth watching at Credo, since a handful of hyperscalers drive the majority of its revenue at this stage.
But the demand behind those relationships keeps growing, and the results keep arriving ahead of expectations, which has kept investor confidence in Credo’s trajectory intact.
Arm is described as “a harder company to walk away from than its premium valuation implies,” given how deeply embedded its chip architecture is across global devices.
Arm’s royalty revenue has more than doubled in the AI data center segment, and the business compounds reliably regardless of any single customer relationship.
For investors comfortable with Credo’s customer concentration trade-off, its growth trajectory is described as simply being “in a different league right now.”
Both companies are positioned to benefit as AI infrastructure spending continues accelerating, but they offer investors very different risk and growth profiles to consider.
