Silicon Motion Technology Corporation (NASDAQ:SIMO) was among Jim Cramer’s Mad Money stock calls as he urged investors to exercise caution when it comes to red-hot AI stocks. When a caller asked about the stock, Cramer stated:
That is called SIMO… And we like SIMO. I know it’s moved a lot. So what you do in these is you buy some, and then you wait for a pullback. But you gotta put some on, and I think it’s a good call by you.
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Silicon Motion Technology Corporation (NASDAQ:SIMO) develops and markets NAND flash controllers and specialized storage solutions for various applications, including computing, enterprise data centers, and mobile devices. Heartland Advisors stated the following regarding Silicon Motion Technology Corporation (NASDAQ:SIMO) in its Q1 2026 investor letter:
An example is Silicon Motion Technology Corporation (NASDAQ:SIMO). A year ago, shares of the leading maker of memory components used in PCs, smartphones, data centers, and industrial and auto applications sold off amid a variety of concerns. They included tariffs, consumer spending worries, and questions over whether investors might be overestimating the capex needs of large-scale cloud service providers known as hyperscalers. At the time, we remained committed to the stock because we believed the company was in the early days of a re-rating process, as SIMO had been making a push away from trailing-edge, lower-margin consumer electronics into higher-margin, leading-edge applications driven by hyperscaler demands.
What a difference a year makes. In the first quarter, the stock was a contributor to our outperformance, as consumer spending has held up and hyperscalers continue to indicate robust datacenter capex growth. In their fourth-quarter conference call, management reiterated the firm’s outlook for their PC and smartphone end markets and the growth prospects for their data center storage components, which are expected to drive margins substantially higher.
Yet in our opinion, SIMO remains meaningfully undervalued versus our current price target. The stock currently trades at $117, but we believe the company should be valued at $185. That’s based on a multiple of 15X EBITDA plus an anticipated $160 million cash settlement from SIMO’s ongoing arbitration with MaxLinear surrounding the termination of a proposed merger agreement more than two years ago.
While we acknowledge the risk and potential of SIMO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SIMO and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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