Rambus gets initiated with bullish views at Wells Fargo

Wells Fargo began coverage of Rambus (NASDAQ:RMBS) with an Overweight rating and a $62 price target.

Shares of the DDR memory chipmaker rose about 4% premarket on Wednesday.

The firm sees Rambus as a clear beneficiary of the long-term secular expansion of memory in datacenter. They view the company continuing to benefit from server core count expansion driving more Dual In-Line Memory Modules, or DIMMs, per server, a content expansion from the shift to DDR5, and an expected rebound in traditional servers in 2025 and beyond.

Analysts led by Aaron Rakers noted that Rambus is strategically positioned to benefit from increasing data center memory complexity, companion chip total addressable market, or TAM, expansion, and significant content increase and opportunity in new Multiplex-Rank Dual In-Line Memory Modules, or MRDIMMs.

The analysts think that Rambus’ position as an expanding data center memory interface chipset provider has been overshadowed by the focus on high-bandwidth memory, or HBM, chips demand, and concerns of DDR4/5 oversupply.

Rambus is well-positioned in an underappreciated growth TAM. Their model implies Rambus’ memory chipset TAM expanding to over $3.4B by 2028 from the $1.24B in 2023, according to the analysts.

The analysts added that expanding server CPU core counts drive memory channel (DIMM) per servers; while, physical limitations are driving new architectural approaches.

In addition, the firm noted that Rambus’ DDR5 companion chip expansion is still early.

Rakers and his teams said that normalized DDR5 inventory + aging traditional server installed base is a positive going into 2025; AMD (AMD), Turin and Intel (INTC) Granite Rapids server CPU cycles are catalysts for the replacement of historically aged traditional servers on easy comps.

Despite the rapid rise of HBM memory and AI servers, the analysts see traditional non-HBM DRAM representing high-80% of server DRAM capacity shipped in 2028.

The market for HBM is led by South Korean companies SK hynix and Samsung (OTCPK:SSNLF), and to a lesser extent by American chipmaker Micron Technology (MU).