Credo Technology Jumps 200% on AI Capex, Penalizing Holdouts
Credo Technology Group surged nearly 200% in the second quarter as accelerating AI infrastructure spending ignored broader economic fears, creating a significant relative headwind for small-cap growth funds that missed the rally.
Credo Technology Group closed at $226.74 on July 15, capping a second-quarter surge of nearly 200% driven by heavy capital expenditure in artificial intelligence infrastructure. The semiconductor company, which supplies high-speed connectivity solutions for optical and electrical Ethernet applications, reached a market capitalization of $42.28 billion.
The rapid ascent created a measurable penalty for fund managers who lacked exposure. Polen Capital noted in its second-quarter 2026 investor letter that Credo was among the largest relative detractors for its 5Perspectives Small Growth Strategy, despite the fund not holding the stock.
"Credo Technology Group Holding Ltd was among our largest relative detractors despite not being held in the Portfolio during the quarter," Polen Capital wrote. "The company, which provides high-speed connectivity solutions used in AI and data center infrastructure, was up nearly 200% in the quarter as investors continued to reward companies viewed as key beneficiaries of accelerating AI-related capital spending."
The Polen strategy still posted strong absolute returns, gaining 33.22% gross and 32.83% net. This outpaced the 25.71% return of the Russell 2000 Growth Index, as small-cap stocks broadly defied lingering market concerns over economic growth, trade policy, and the durability of AI investments.
Investor confidence in AI capital spending was specifically bolstered by positive announcements from hyperscalers and enterprise customers. This sustained demand is driving growth across a wide swath of sectors, particularly power generation and data center construction.
Despite the explosive share price growth in the second quarter, institutional backing for Credo actually thinned slightly earlier in the year. At the end of the first quarter, 59 hedge fund portfolios held the stock, down from 69 in the prior quarter. Credo also did not rank among the 40 most popular stocks among hedge funds heading into 2026.
The stock's recent trajectory highlights the binary risks currently facing investors in the AI supply chain. While Credo has gained 114.28% over the past 52 weeks, its one-month return leading up to mid-July was negative 22.39%, underscoring the extreme volatility accompanying the sector's rapid revaluation.
