Credo Technology Group (NASDAQ: CRDO) has agreed to acquire Israeli silicon photonics startup DustPhotonics for $750 million in cash plus approximately 0.92 million shares of Credo common stock, in a deal announced April 13, 2026. The acquisition may rise to $1.3 billion in total consideration if DustPhotonics hits certain financial milestones. It marks Credo’s most significant strategic move to date and signals a broader industry shift toward optical interconnects as a foundational layer of AI data center infrastructure.
The transaction is expected to close in the second quarter of 2026, subject to regulatory approvals.
Why Silicon Photonics Matters for AI Clusters
The strategic logic behind the deal lies in a connectivity problem that is becoming more acute as AI cluster densities rise. Connecting tens of thousands of GPUs inside a hyperscale AI training or inference cluster requires enormous bandwidth at low latency and low power consumption. Traditional copper-based electrical interconnects, which have served data centers for decades, are reaching their practical limits at the speeds that current and next-generation AI infrastructure demands.
Silicon photonics uses light rather than electricity to transmit data between servers, offering significantly higher bandwidth density, lower power consumption, and better signal integrity over the distances that large-scale GPU clusters involve. DustPhotonics, founded in Israel in 2017 by Kobi Hasharoni, Amir Garon, and Ben Rubovitch, has built a portfolio of Silicon Photonics Photonic Integrated Circuit (SiPho PIC) technology spanning 400G, 800G, and 1.6 terabit speeds, with a roadmap extending to 3.2 terabits. Its chips integrate multiple optical functions onto a single silicon die, reducing component complexity, improving manufacturing yields, and enabling lower cost at scale.
LightCounting and Credo estimate the SiPho PIC market will reach $6 billion by 2030, driven by rising demand from hyperscale AI infrastructure buildouts.
What Credo Gets From the Deal
The acquisition gives Credo a vertically integrated connectivity stack spanning SerDes, Digital Signal Processing, silicon photonics, and system integration, covering both electrical and optical interconnects across AI scale-out and scale-up networks. William Brennan, Chairman, President and CEO of Credo Technology, described the deal as a defining step in the company’s strategy to lead across the full spectrum of AI connectivity.
DustPhotonics’ SiPho PIC technology forms a foundational component of Credo’s ZeroFlap optical transceiver platform, which targets the elimination of link flaps — brief interruptions in data flow that can crash extended AI training sessions and cost hyperscalers millions in lost compute time. Bringing that technology in-house lets Credo reduce its reliance on third-party optical components and take control over a part of the stack that is increasingly central to AI cluster reliability.
DustPhotonics has raised approximately $150 million from investors including Intel Capital and serial semiconductor entrepreneur Avigdor Willenz, who also serves as the company’s chairman. Its SiPho PICs are already running in transceivers at leading hyperscale AI clusters and are in active design for Near Port Optics and Co-Packaged Optics applications.
Credo expects the combined optical business to generate more than $500 million in optical revenue in fiscal 2027, with the transaction accretive to non-GAAP earnings per share in that year.
