During the October 7 lightning round of Mad Money, a caller asked whether Rambus Inc. (NASDAQ:RMBS) was a hold, sell, or buy. Jim Cramer replied:
You know, it’s never really intrigued me. There’s no real catalyst. It just kind of sits there. I see no reason to buy it.
Rambus (RMBS) ranks tenth on our list of 10 Best AI Stocks to Buy According to Billionaire Stanley Druckenmiller. See which nine AI stocks rank ahead of RMBS?
Record Results Show Demand for Memory Technology
Cramer’s lack of enthusiasm contrasts with Rambus Inc.’s recent operating performance. Second-quarter revenue reached a record $207.4 million, up 20% year over year. Product revenue increased 22% to $99.2 million, while GAAP diluted EPS was $0.61 and adjusted diluted EPS was $0.77. Operating cash flow totaled $61.2 million.
The company supplies chips and intellectual property that support data movement and security. Its latest product announcements included chipsets for DDR5 9600 server and client memory modules and PCIe 7 switch intellectual property, extending its offerings for next-generation computing systems. Management linked the product momentum to demand from data centers and AI infrastructure. A shift in server memory could provide another growth catalyst, but the opportunity comes with a timing question that matters when assessing how quickly Rambus can benefit.
The valuation is below one prominent data-center semiconductor peer. Rambus trades at approximately 31.3x forward earnings versus 47.7x for Marvell Technology. Their product portfolios and revenue models differ, so the discount provides context rather than establishing that Rambus is inexpensive.
Product Growth Must Offset Uneven Royalties
Rambus Inc.’s third-quarter outlook highlights why different parts of the business need separate attention. Management projected product revenue of $110 million – $116 million, above the second quarter’s $99.2 million. However, royalty revenue was expected at $69 million – $75 million, below $84.2 million in Q2. Total revenue guidance was $210 million – $216 million.
Those figures indicate that stronger chip sales do not necessarily translate into equally strong sequential growth across the company. The forward earnings multiple also remains above 30x despite the discount to Marvell. Investors are still paying for future growth, leaving less room for disappointing product adoption or earnings. The changing revenue mix also raises a profitability question. An earlier analysis of Rambus’s margin pressures examined why record sales were accompanied by a sharp decline in the shares.
More Funds Bought In Despite Cramer’s Reservations
Insider Monkey’s database of over 1000 hedge funds showed 50 hedge funds holding Rambus Inc. in Q2, up from 35 in Q1. Short interest stood at 7.78% of float. Among those funds, AQR Capital Management was the most prominent shareholder with 1.2 million shares in Q2. Rambus also ranked tenth among AI stocks held by billionaire Stanley Druckenmiller, placing it among companies offering different ways to participate in the AI buildout. The increase in holders shows broader institutional participation, while the short position points to a less unanimous view of the stock.
Rambus has an identifiable business opportunity in faster memory and data-center infrastructure, even if Cramer does not see a compelling reason to buy. Record results support the company’s progress. The investment decision comes down to whether that growth can continue at a pace that justifies the price.
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