Netlist Is Due for a Rally as Memory Prices Soar
Key Points
Netlist should receive almost $1 billion in court settlements from tech giants, and can expect royalties on its many patents down the road.
The company is experiencing substantial revenue growth and recently became profitable.
Other memory companies have been delivering superb performances lately.
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Memory chips have become the hottest trade in tech, with Micron and Sandisk providing plenty of headlines. However, there is a much smaller memory stock that has stalled since May, despite the company in question gaining market share.
Netlist (OTC: NLST) started the year hot and delivered excellent earnings, but its stock price is down by more than 25% from its 2026 high.
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Image source: Getty Images.
Netlist is expanding legal action against tech giants
Netlist owns a vast patent portfolio that covers critical technology for the AI boom. Multiple tech giants have infringed on its patents, and Netlist is positioning itself to collect settlements and recurring royalties from them.
The legal lottery aspect isn't the only thing that makes Netlist exciting; its implications make it noteworthy. The company has won almost $1 billion in verdicts from Samsung and Micron. Money has not yet changed hands, but Netlist has enjoyed some small wins in court that give its patents more weight.
In an earlier press release, Netlist pointed out that it had expanded its net to target Alphabet, Super Micro Computer, Nvidia, and Broadcom as additional respondents.
Its patents include key components used in memory chips, which could result in a massive payday. Not only can Netlist receive settlement payments, but it can also force tech giants to agree to royalty deals to continue using its patented technology.
Netlist is creating its own memory products
Netlist's team isn't just twiddling its thumbs waiting for the legal system to work in its favor. The more exciting part of the investment thesis relates to the company's existing memory products. Its DDR5 memory modules are critical for AI data centers, and that product has fueled parabolic sales growth for Netlist.
In the first quarter, revenue surged by 262% year over year. In the press release, CEO C.K. Hong credited that growth to "robust demand for [its] memory products" while touting the company's strong positioning for the AI memory technologies supercycle.
The company also turned profitable in the quarter, with net income of $8.6 million, compared to a $9.5 million net loss in the same period last year. The $104.9 million in total Q1 sales also marked a 38.6% sequential improvement over Q4 2025's revenue of $75.7 million.
Netlist's market cap is just shy of $1 billion, and the company remains relatively overlooked on Wall Street despite its explosive top-line growth. The stock trades at only 3.5 times sales, while Micron and Sandisk have price-to-sales ratios of 12 and 20, respectively.
Netlist reported its Q2 2025 earnings on Aug. 7, 2025. That suggests that second-quarter results for this year will be released in early August, too. If the recent results from other AI memory stocks are any indication, Netlist is likely to post meaningful sequential growth again. After that, it will be harder for the stock to remain hidden.
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Marc Guberti has positions in Broadcom and Netlist. The Motley Fool has positions in and recommends Alphabet, Broadcom, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.
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