This Tiny AI Stock Has Crushed Micron and Nvidia This Year. Here's Why It Can Keep Going.

This Tiny AI Stock Has Crushed Micron and Nvidia This Year. Here's Why It Can Keep Going.

Marc Guberti, The Motley Fool

Thu, August 27, 2026 at 4:15 PM GMT+3 6 min read

• NVDA +6.92%
• MU +0.94%

Micron and Nvidia continue to make headlines, but one tiny AI stock has drastically outperformed them both in terms of growth in 2026. Netlist (OTC: NLST) has more than quintupled year to date, and its rally looks far from over.

Its hardware sales have been surging in recent quarters, and its recent legal wins point to the end of a decade-long battle against tech giants.

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The hardware component

Netlist earned $109.8 million in its second quarter, a 163% year-over-year increase. Net income also flipped from a $6.1 million net loss in Q2 2025 to $1.4 million in net profits in the recent quarter.

Netlist makes most of its revenue by reselling hardware, but it is also developing CXL solutions that could become a major growth driver in the future. Fortune Business Insights projects a 54.48% compound annual growth rate for CXL memory products through 2034. Netlist is already making money from its DDR5 memory controllers, showing that its hardware revenue isn't just from reselling.

Despite this fundamental growth and the recent stock rally, Netlist actually trades at a fairly cheap valuation. Its price-to-sales ratio of 5 is less than half of Micron's valuation, and their forward P/E ratios are nearly identical.

The groundbreaking settlement with Samsung

Netlist's hardware component is an underrated part of the business that could become a key driver in the future. The near-term catalysts that can help Netlist rally even more are its massive legal wins, which could end more than a decade of drawn-out proceedings.

Netlist has asserted that multiple tech giants have infringed its patents for key memory products that form the backbone of AI infrastructure. Its first patent infringement lawsuit unfolded in 2009 against Alphabet, and that case has not been resolved yet.

The list grew over the years, and Netlist did chalk up some wins, including one that led to a five-year deal with SK Hynix in 2021. That deal secured royalties and memory products for Netlist and permitted SK Hynix to use Netlist's patents.

The lawsuits have gained more traction amid the memory chip boom, as higher sales are increasing the total damages Netlist can claim, and could yield higher royalties in future deals.

That was the thesis for multiple years, and Netlist finally delivered a landmark five-year deal with Samsung (OTC: SSNLF) related to Netlist's vast patent portfolio. Samsung can now use the patents, but Netlist gets $239 million up front, plus up to $32.9 million in quarterly royalties through 2031. Samsung will have to renew the deal to preserve its access to Netlist's patent portfolio, which has become critical amid the AI build-out.

Netlist also has the right to purchase up to $300 million in Samsung DRAM and NAND memory products per year under the deal. The company can either use these products or resell them at a higher price.

Samsung is the first domino

The legal proceedings went on for so long in large part because tech companies thought they could force Netlist into bankruptcy. That scenario is now unfeasible. Not only is Netlist already turning profits on its hardware products, but almost all the revenue from the Samsung deal is pure profit. Finally, Netlist no longer has to commit capital to a legal battle against Samsung.

It's also a big legal win that fortifies Netlist's case against other tech giants, and the company isn't wasting any time. One week after announcing the Samsung deal, Netlist went on the offensive by seeking exclusion and cease-and-desist orders against Micron, Supermicro, Hewlett Packard Enterprise, and Lenovo due to patent infringements.

Those orders can prevent these chipmakers from importing memory chips into the United States. Almost all of Micron's chips are produced overseas, and most of its sales go to U.S. hyperscalers. Micron earned $41.5 billion in its fiscal 2026 third quarter and guided for $50 billion in the next quarter. Netlist can block almost all of those sales from being realized unless Micron reaches a deal. Naturally, most companies reach settlements before orders like these take effect.

Netlist has already won patent infringement cases against Micron, including a $445 million award in 2024 that Micron continues to fight. However, Samsung waving the white flag means others will have to follow. Micron is the big prize, but the other three companies named in the exclusion and cease-and-desist orders can also provide lucrative royalties for Netlist.

The company also named Alphabet, Nvidia, and Broadcom in another patent infringement press release. A win against Micron could give the company more leverage when targeting these tech giants and turn high legal expenses into high-margin strategic deals.

The legal-lottery-ticket aspect of the stock continues to build momentum, while its hardware products gain market share.

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Marc Guberti has positions in Broadcom and Netlist. The Motley Fool has positions in and recommends Alphabet, Broadcom, Hewlett Packard Enterprise, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.

This Tiny AI Stock Has Crushed Micron and Nvidia This Year. Here's Why It Can Keep Going. was originally published by The Motley Fool