Rambus, the San Jose designer of the small companion chips that sit between a server processor and its memory modules, crossed a line last quarter that it has been approaching for a decade: it earned more from selling silicon than from licensing patents. Product revenue reached a record $99.2m in the June quarter, up 22% from a year earlier, overtaking the royalty line that has defined the company since the 1990s.

That is a better business than the one the market is currently paying for — and a more cyclical one.

The annuity stopped growing

Total June-quarter revenue was a record $207.4m, up 20.4% year over year and an acceleration from 8.1% in the March quarter. Gross margin widened to 79.8% from 74.9%. But the royalty stream underneath has been flat for four quarters: $69.6m in March, an $84.2m spike in June on contract timing, and September guided back to $69-75m. All of the growth is now chips.

The chip growth has a clean mechanism. Rambus is paid per memory module, and the number of memory channels per server socket is rising — AMD at twelve, Intel moving from eight to twelve, the roadmap pointing to sixteen — with each channel adding a register clock driver and power-management part. Management's own long-term product gross-margin model is 60-65%, and it is running inside that; the headline 79.8% reflects the zero-cost royalty line, not the silicon.

The bear case attacks the denominator, not demand. Because Rambus earns a fee per module rather than a slice of the DRAM price, it needs modules to be built — and TrendForce expects registered-DIMM bit supply to grow only 15-20% as memory makers divert wafers to high-bandwidth memory for AI accelerators. Baird downgraded Rambus to Neutral on exactly that logic while keeping a $120 target. The market has priced the same idea across the tier: over 90 days Micron rose 26% and Marvell 24%, while Rambus fell 36.5%. Scarcity accrues to whoever owns the bits.

Microchip is not a classification error

Microchip Technology, a maker of microcontrollers and analog parts for cars and factories that also owns a PCI Express switch franchise from its Microsemi acquisition, has come out of a brutal inventory correction. June-quarter revenue was $1.485bn, up 38%. Gross margin hit 63.2% against 53.6% a year earlier, a fifth straight quarter of expansion, and operating margin recovered to 22.7% from a 3.0% trough. Inventory fell to 175 days, distributor stock sits at 25 days, and June was the strongest booking quarter in about four years.

Its data-center exposure is real: sales there were about $591m in calendar 2025, roughly 14% of revenue, and the company has guided its Data Center Solutions unit alone toward $500m in 2026 within a total data-center number approaching $1bn. Fourteen PCIe Gen6 design wins are booked; none ships in volume yet. Set against that: underutilization charges still run about $30.5m a quarter, and net debt of $5.2bn absorbs all free cash beyond the dividend.

The selloff belongs to analog, not memory

Over the past month Texas Instruments fell 10.4%, NXP 19.6%, ON Semiconductor 19.5% and STMicroelectronics 23.7%. Rambus, down 13.3%, and Microchip, down 10.7%, sit inside that band. On 18 August analog names sold off together with no company-specific catalyst.

The controls confirm it. Allegro MicroSystems, which sells magnetic position sensors to carmakers and has no memory product at all, grew revenue 27.5% to $259.2m with margin up — and fell hardest of the four, down 25.5% in a month and 47% below its 30 June high. Everspin Technologies, which makes magnetoresistive memory, is the one name up over 30 days; its 90-day collapse is the unwind of a spring spike on a $40m defense subcontract, after Kerrisdale Capital disclosed a short position arguing its largest end market is casino gaming.

What the price now assumes

Rambus trades at 16.7 times trailing gross profit, against 20.9 times in February and 28.0 times in May — while trailing gross profit rose from $537.6m to $592.0m over that stretch. It is cheaper on that measure than it was six months and a 28% twelve-month gain ago. Microchip's trailing price-to-earnings of 104x is trough-earnings noise; on gross profit it has gone from 17.5 times in February to about 13.6 times, with the profit base up 27% to $3.08bn.

Rambus peaked at $170.66 on 3 June and has lost 47% since, its 50-day average below its 200-day since late July; Microchip's averages crossed the same way on 11 August. Allegro alone still holds an uptrend. In each case the shares turned well after the numbers improved.

The setup

Where it stands — Two improving semiconductor businesses have de-rated alongside analog peers with no memory exposure, on multiples below February's. Would confirm — Rambus September product revenue lands in the guided $110-116m range, up about 20% year over year. Would invalidate — Rambus royalties print below $69m, or Microchip's December bookings fall back under 1.0 book-to-bill. Watch next — Rambus reports the September quarter in late October; Microchip's Hailo acquisition closes in September. Valuation — Rambus at 41.0x trailing and 30.0x forward earnings, 16.7x trailing gross profit versus 20.9x in February.