Is Silicon Motion Technology the Next Sandisk?

Memory stocks have boomed during the past year as more investors recognize the connection between AI chips and memory chips. No stock seems to be as hot as Sandisk (NASDAQ: SNDK), which is up by more than 3,000% during that time. It's also up by almost 500% year to date, so it's natural that some investors are looking for a smaller version of the company.

Silicon Motion Technology (NASDAQ: SIMO) may be the answer. It's a fellow beneficiary of the memory solutions boom, and with a market cap of less than $10 billion, it still remains relatively unknown.

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How Sandisk and Silicon Motion Technology benefit from memory demand

Sandisk and Silicon Motion Technology have both reported tremendous sequential growth, but before getting into any numbers, it's important to understand how both of these businesses work.

Sandisk produces NAND flash chips and memory products. This technology stores data and acts as the backbone for many AI models. They are a key part of the AI boom.

However, NAND flash chips are like a band without a director. Those chips do not know what to do if a director isn't guiding them. Directors and bands need each other, and that's the relationship between these two companies. Silicon Motion Technology produces NAND flash controllers that instruct Sandisk's NAND flash chips. Every semiconductor with NAND flash chips needs a NAND flash controller, giving Silicon Motion Technology direct exposure to Sandisk's success.

Sandisk makes its own NAND flash controllers and turns to Silicon Motion Technology for additional controllers. Silicon Motion Technology touts itself as a company that supports NAND flash components from Sandisk, Micron, and other heavy-hitters in the memory storage build-out. That gives it direct exposure to the industry.

Silicon Motion Technology is gaining attention

Although Silicon Motion Technology remained an under-the-radar pick while Sandisk and Micron soared to start the year, that cat got out of the bag when the company reported Q1 earnings on April 28.

In the week of April 27, investors traded 9.9 million shares, the stock's most active week during the past year. The following week, almost 7 million shares swapped hands, making it the stock's third-most active week. Volume remains elevated to this day.

All of that volume came because Silicon Motion Technology reported 23% sequential revenue growth in Q1 while offering a blowout forecast. The company expects high sequential growth each quarter for the rest of the year.

AI memory companies have shown that sequential growth can accelerate quickly and exceed projections. Sandisk delivered 31% sequential growth in its second fiscal quarter of 2026, which ended on Jan. 2. Sandisk's outlook had implied $4.6 billion in Q3 FY 2026 revenue at the midpoint, but its results came in at $5.95 billion. That significant beat represented 97% sequential growth.

Those results show how quickly an AI company can grow. Silicon Motion Technology also crushed its projections with $342.1 million in Q1 revenue. The company told investors to expect as much as $306 million in Q1 revenue when it released Q4 2025 results.

Silicon Motion Technology shares have almost doubled since the company released its Q1 results, and the stock has almost tripled year to date.

This is a multiyear cycle

One of the weaknesses with semiconductor stocks like Silicon Motion Technology and Sandisk is that they operate in cyclical industries. During shortages, semiconductor companies produce more chips and other supplies to meet rising demand. They can charge high prices during shortages, but once supply issues wane, these companies are stuck with large inventory gluts, which lead to price cuts and narrower profit margins.

However, the AI infrastructure build-out is still in its early stages. Nvidia regularly runs out of AI chips to sell, with lengthy timelines for customers who want chips right now. SK Hynix told investors back in October that it sold all of its memory chips allocated for 2026. Its high-bandwidth chips are different from what Sandisk and Silicon Motion Technology offer, but they are all part of the AI infrastructure build-out.

Strong demand from tech companies and ambitious outlooks tied to AI expansion suggest we are in the middle of a multiyear cycle that should benefit the memory storage industry. Sandisk has been one of the biggest winners in the stock market, but Silicon Motion Technology has a shot at producing similar returns in the long run.

Investors are starting to circle the company and pour capital into its stock.

Marc Guberti has positions in Silicon Motion Technology. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.