If I could only invest $500 in one artificial intelligence stock this month, I’d pick Netlist (NLST +4.67%). Major developments in several court cases have fortified the company’s balance sheet and point toward soaring net profit margins in the years ahead. It’s a mid-cap valued at just $2.1 billion, and it’s still trading well below $10 per share, but its 545% year-to-date return shows there’s strong demand for this emerging memory stock.
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Memory-chip makers have settled in Netlist’s patent infringement cases
Investors first paid attention to Netlist as it battled with Samsung (SSNLF +0.00%) and Micron (MU +1.96%) in court over patent infringement cases, asserting that the giant memory makers were using its tech in their chips. After years of legal wrangling, in 2026, both chipmakers came to agreements with Netlist.
NLST Netlist
$6.14+$0.27 (+4.67%)
OTC · As of 3:59 PM ET 10/21/26
The Samsung deal came first, and it was the more attractive of the two. Netlist will receive quarterly licensing fees of up to $27.5 million, and Samsung will get access to Netlist’s entire intellectual property portfolio. The deal also included a $200 million up-front licensing fee, and gave Netlist the right to purchase up to $300 million in Samsung memory products for the next five years. The total value of the deal comes to $897 million over the next five years.
The deal with Micron did not include an up-front payment, nor did it give Netlist the right to purchase a specified number of its memory products each year. However, Netlist will receive $30 million per quarter from Micron through 2031, totaling $600 million over the term.
The third of the world’s three major memory-chip makers, SK Hynix (SKHY +2.48%), entered a similar deal in 2021 and must renew it this year, likely on similar terms to the ones Samsung and Micron accepted.
A five-year window to make the hardware work
Netlist’s deals with those memory-chip makers could bring it close to $100 million in annual recurring revenue for the next five years. Nearly all of that will be pure profit. Meanwhile, Netlist is also going after other tech giants for patent infringement. Those cases could eventually produce additional royalty income for the company, but that’s not the key factor to monitor.
Most of the patents Netlist was fighting over with the memory makers will expire before 2031, so whatever deals they come to for years beyond that, we can expect that the company won’t continue to book as much annual recurring revenue from the contracts. Almost all of that revenue will vanish. Netlist is still building its patent portfolio as it develops new technologies, but that doesn’t guarantee lucrative deals like the ones it recently received.
The key question is whether Netlist can use the funds it’s getting over the next five years to scale its memory hardware business, and it’s not starting from nothing. Netlist’s revenue jumped by 163% year over year in the second quarter — before Samsung and Micron signed their deals. Netlist CEO C.K. Hong cited the company’s next-generation AI memory technologies when discussing the Q2 results.
The company recently introduced new memory products for agentic AI as it continues to build its portfolio. In other words, Netlist’s business doesn’t just consist of patents. Its CXL NVvault addresses the memory wall, an issue that can cause AI models and systems to slow down or stop working if large volumes of data can’t be moved quickly enough between storage chips and AI processor chips.
CXL NVvault makes large amounts of memory easily accessible to AI chips so they can maintain top-level performance, and it’s already being sampled by system-on-a-chip vendors, hyperscalers, and major OEMs.
The valuation is compelling
Netlist earned $109.8 million in the second quarter. Its deals with Samsung and Micron, plus the anticipated renewal of its deal with SK Hynix, could push its quarterly revenues closer to $200 million while significantly expanding profit margins. That comes to about $800 million in annual revenue against a $2.1 billion market cap.
Netlist’s revenue could continue to surge as its memory products end up in more data centers. It already has strong relationships with industry leaders, and since its revenues are relatively low compared to other memory product providers, a single deal with a large hyperscaler could be enough to double Netlist’s revenue year over year. The company has also positioned itself well for the agentic AI trend.
Netlist stock looks cheap in light of the settlements it has reached in its patent cases, and a future uplisting to the Nasdaq could attract more capital. Netlist looks as though it’s on course to follow the same path as Rambus, which turned similar patent case victories into a thriving memory chip business. Netlist is still in the early stages of that journey, and the influx of cash it will receive could help it gain market share in the memory industry.
