3 Reasons to Buy Silicon Motion Technology Before the End of 2026

It’s no secret that stocks connected to the AI industry have been some of the market’s top performers over the past year, but there are still a few that remain relatively under the radar. Silicon Motion Technology (NASDAQ: SIMO) is one of them. It produces NAND flash controllers, which are vital for AI infrastructure. That’s the gist of what the company does, but these three key reasons for buying the stock demonstrate its long-term potential.

Gloved hands holding a memory chip.
Image source: Getty Images.

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Silicon Motion Technology works with the leading memory providers

Silicon Motion Technology works with the largest memory-chip makers — Micron (NASDAQ: MU), Samsung (OTC: SSNLF), SK Hynix (NASDAQ: SKHY), and Sandisk (NASDAQ: SNDK), as well as other fast-growing players. Rising demand for their memory products directly translates into additional revenue for Silicon Motion Technology.

Some of these customer relationships stretch across more than 20 years, which will make it more difficult for new competitors to gain market share. Silicon Motion Technology has a secure position as a key provider of NAND flash controllers, and it’s also working with hyperscalers.

High growth comes at a low valuation

Silicon Motion Technology’s fundamentals look promising. Its 19.6 forward price-to-earnings (P/E) ratio pairs nicely with revenue that more than doubled year over year in the second quarter. That growth also came with sharply rising margins. Net income jumped from $16.3 million to $136.1 million in Q2.

The company has been enjoying high sequential growth rates for its revenue and profits — the same condition that has led to steep stock rallies for Micron and Sandisk. Silicon Motion isn’t growing as quickly as those two chipmakers, but it’s still growing at an accelerated rate compared to many other tech companies. Furthermore, the 20% drop the stock took over the past week was more due to macroeconomic issues than to the company’s fundamentals, a point that highlights the nature of the long-term opportunity for investors.

The company has a history of crushing guidance

Investors who can tune out the macroeconomic noise and focus on management’s latest guidance may see the potential upside of Silicon Motion Technology. The company guided for up to $541 million in third-quarter revenue, which would be a 20% sequential jump. That’s already a good number, but Silicon Motion Technology actually has a good history of beating guidance, especially during the AI era.

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