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The underperformance can mainly be attributed to its lower-than-expected top-line results for the third quarter of 2024. Rambus is facing a slowdown in revenue growth due to the broader enterprise market shifting its focus toward artificial intelligence (AI) and machine learning workloads, reducing the need for Rambus’ memory solutions designed for traditional server systems.
However, Rambus is trying to offset this negative effect by focusing on emerging market opportunities, particularly in the AI space. In this area, the company is continuously expanding its DDR5 system-on-chips portfolio, which plays a significant role in improving the memory performance for AI workloads. Recently, RMBS has launched comprehensive memory interface chipsets for Gen5 DDR5 Rank Dual Inline Memory Module (RDIMM) and next-generation DDR5 Multiplexed RDIMMs.
The Gen5 DDR5 RDIMM features a fifth-generation registering clock driver (RCD) that provides a processing speed of 8000 MT/s. The MRDIMM, on the other hand, comes with multiplexed RCD and multiplexed data buffer that powers it to operate at the speed of 12,800 MT/s.
The products also feature a second-generation Power Management IC, PMIC5030, which delivers a large amount of current at lower voltages, accelerating processing speed. These newly introduced products will improve DDR5 performance with increased bandwidth and memory capacity for AI workloads.
Rambus 3 Month Performance
Image Source: Zacks Investment Research
Rambus Expands Its Presence in the AI Market
Rambus is pivoting to capitalize on emerging market opportunities, particularly in the AI and data center sectors. The need for high-bandwidth, low-latency memory solutions that support AI and machine learning workloads is skyrocketing.
Rambus’ high-performance memory products, including DDR5 and HBM (high bandwidth memory), are critical for AI data centers that need to process large amounts of data efficiently. The company’s strategic focus on next-generation memory solutions places it in a strong position to benefit from the increasing demand for AI-specific infrastructure.
The introduction of new products, including Client Clock driver chip, PCIe 7 IP solutions and HBM4 controller intellectual property chips for next-generation AI workloads will drive revenues over the long run.
Growing Adoption of Rambus’ Patented Products
Alongside the growth in AI-related offerings, Rambus is benefiting from the growing adoption of its patented products. Industry leaders like Advanced Micro Devices (AMD - Free Report) , NVIDIA (NVDA - Free Report) , Broadcom, Cisco (CSCO - Free Report) , IBM, Marvell, MediaTek, Micron, Qualcomm and STMicroelectronics use Rambus’ patented technologies and solutions.
RMBS and Advanced Micro Devices signed the first patent license agreement in the mid-2000s. The initial agreement allowed AMD to use Rambus patented technologies in various products, including those used in DDR2, DDR3, FB-DIMM, PCI Express and XDR controllers. NVIDIA has been using Rambus technology for more than a decade now. RMBS and Cisco have been in collaboration for a decade with CSCO using Rambus’ security technologies in its products.
Rambus is leveraging its established product portfolio while actively exploring new opportunities in the AI market. For the third quarter, the company projects revenues between $139 million and $157 million. The Zacks Consensus Estimate for RMBS’ third-quarter revenues is pegged at $147 million, indicating year-over-year growth of 9.5%.
Conclusion: Hold RMBS Stock Now
Rambus’ sustained focus on next-generation memory solutions and AI data centers, along with its expanding security offerings, bodes well for long-term growth. However, lower spending on traditional servers is likely to continue hurting its top-line growth in the near term. Moreover, it carries a Zacks Value Score of D, indicating a stretched valuation at present.
Considering the aforementioned factors, retaining this Zacks Rank #3 (Hold) stock presents a compelling opportunity for investors now, as the company adapts to industry shifts and capitalizes on emerging trends. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Rambus Expands Its AI Portfolio: How Should Investors Play the Stock?
Rambus (RMBS - Free Report) shares have plunged 27.4% over the past three months, underperforming the Zacks Electronics - Semiconductors industry’s return of 8.4%. RMBS stock also underperformed the Zacks Computer and Technology sector and the S&P 500.
The underperformance can mainly be attributed to its lower-than-expected top-line results for the third quarter of 2024. Rambus is facing a slowdown in revenue growth due to the broader enterprise market shifting its focus toward artificial intelligence (AI) and machine learning workloads, reducing the need for Rambus’ memory solutions designed for traditional server systems.
However, Rambus is trying to offset this negative effect by focusing on emerging market opportunities, particularly in the AI space. In this area, the company is continuously expanding its DDR5 system-on-chips portfolio, which plays a significant role in improving the memory performance for AI workloads. Recently, RMBS has launched comprehensive memory interface chipsets for Gen5 DDR5 Rank Dual Inline Memory Module (RDIMM) and next-generation DDR5 Multiplexed RDIMMs.
The Gen5 DDR5 RDIMM features a fifth-generation registering clock driver (RCD) that provides a processing speed of 8000 MT/s. The MRDIMM, on the other hand, comes with multiplexed RCD and multiplexed data buffer that powers it to operate at the speed of 12,800 MT/s.
The products also feature a second-generation Power Management IC, PMIC5030, which delivers a large amount of current at lower voltages, accelerating processing speed. These newly introduced products will improve DDR5 performance with increased bandwidth and memory capacity for AI workloads.
Rambus 3 Month Performance
Image Source: Zacks Investment Research
Rambus Expands Its Presence in the AI Market
Rambus is pivoting to capitalize on emerging market opportunities, particularly in the AI and data center sectors. The need for high-bandwidth, low-latency memory solutions that support AI and machine learning workloads is skyrocketing.
Rambus’ high-performance memory products, including DDR5 and HBM (high bandwidth memory), are critical for AI data centers that need to process large amounts of data efficiently. The company’s strategic focus on next-generation memory solutions places it in a strong position to benefit from the increasing demand for AI-specific infrastructure.
The introduction of new products, including Client Clock driver chip, PCIe 7 IP solutions and HBM4 controller intellectual property chips for next-generation AI workloads will drive revenues over the long run.
Growing Adoption of Rambus’ Patented Products
Alongside the growth in AI-related offerings, Rambus is benefiting from the growing adoption of its patented products. Industry leaders like Advanced Micro Devices (AMD - Free Report) , NVIDIA (NVDA - Free Report) , Broadcom, Cisco (CSCO - Free Report) , IBM, Marvell, MediaTek, Micron, Qualcomm and STMicroelectronics use Rambus’ patented technologies and solutions.
RMBS and Advanced Micro Devices signed the first patent license agreement in the mid-2000s. The initial agreement allowed AMD to use Rambus patented technologies in various products, including those used in DDR2, DDR3, FB-DIMM, PCI Express and XDR controllers. NVIDIA has been using Rambus technology for more than a decade now. RMBS and Cisco have been in collaboration for a decade with CSCO using Rambus’ security technologies in its products.
Rambus is leveraging its established product portfolio while actively exploring new opportunities in the AI market. For the third quarter, the company projects revenues between $139 million and $157 million. The Zacks Consensus Estimate for RMBS’ third-quarter revenues is pegged at $147 million, indicating year-over-year growth of 9.5%.
Conclusion: Hold RMBS Stock Now
Rambus’ sustained focus on next-generation memory solutions and AI data centers, along with its expanding security offerings, bodes well for long-term growth. However, lower spending on traditional servers is likely to continue hurting its top-line growth in the near term. Moreover, it carries a Zacks Value Score of D, indicating a stretched valuation at present.
Considering the aforementioned factors, retaining this Zacks Rank #3 (Hold) stock presents a compelling opportunity for investors now, as the company adapts to industry shifts and capitalizes on emerging trends. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.