Arm vs. Credo Technology Group: Which Semiconductor Stock Is a Better Buy in 2026?
2026-10-15 21:10
•Sara Appino •The Motley Fool
•••••• ••••••••• Axe Cap view
Arm vs. Credo: Which Semiconductor Play Suits 2026?
Arm offers steady, dependable royalty income while Credo boasts explosive growth but with higher risk.
Arm dominates with its chip architecture powering billions of devices, including 99% of smartphones. Its low debt, high margins, and recurring royalties make it a classic steady compounder. South African exposure is indirect—think Naspers or Prosus for global tech leverage, which both hold Arm stakes. Credo Technology Group, on the other hand, is a smaller, fast-growing player focused on AI data centres. It just posted a staggering 205% revenue surge, showing real momentum. But it also carries concentration risks, relying heavily on a few major customers and partners like Oracle and Microsoft. For JSE investors, Credo's growth story is exciting but less proven compared to Arm's fortress-like business model. The rand’s recent volatility against the dollar (USD/ZAR) also impacts the relative attractiveness, as both stocks ultimately tie back to US-dollar earnings. If the AI boom accelerates unimpeded, Credo could reward early believers. Yet any hiccup in key partnerships or geopolitical supply chain issues could weigh heavily. this is just our opinion and not financial advice
For measured growth, hold or add Prosus for indirect exposure to Arm. For more aggressive stakes, watch Credo closely but limit position size given its higher risk profile.
- USD/ZAR
- Prosus
- Credo Technology Group
- Customer concentration risk at Credo could trigger sharp earnings swings
- Rand volatility impacting returns from US dollar-denominated semiconductor stocks
6/10
The article compares two semiconductor companies: Arm, which licenses chip architecture used in billions of devices globally with strong profitability and low risk, and Credo Technology Group, which provides high-speed interconnects for AI data centers with explosive 205% revenue growth but higher customer concentration risk. The author recommends Credo for its superior growth trajectory despite Arm's defensible business model.
Our take is based on reporting first published by The Motley Fool.