By Kimberley Koenig

Rambus (RMBS) stock is hovering around a buy zone after wild action last week that included a failed breakout. The chip and data center connectivity and safety specialist is Monday's IBD 50 Growth Stock To Watch.

Rambus makes technology used to scale up performance in demanding workloads including generative artificial intelligence and machine learning. Shares are pulling back after bouncing between positive and negative territory Monday, following a two-day sell-off. The company plans to report its fourth-quarter results on Feb. 2.

The company operates three business units: memory interface chips, interface intellectual property and security intellectual property. Rambus designs, develops and licenses chips used in data center servers. Its memory-chip interface technologies connect chips, processors and memory to move data. And its security offerings protect hardware and data.

In addition to data centers, its products and technology are used in the automotive and Internet of Things industries and by the U.S. military.

Rambus ranks No. 2 — Nvidia (NVDA) holds the No. 1 spot — out of 41 stocks in the Electronics-Semiconductor Fabless group. The group holds the 32nd spot out of the 197 industry groups that Investor's Business Daily tracks.

Rambus Stock Hovers Around A Buy Point

The stock exploded 14.4% last Wednesday and broke out of a second-stage consolidation pattern with a 114.55 buy point in heavy volume. Shares spiked to an all-time high of 135 the next day before reversing and closing lower.

Rambus stock was back below that buy point Monday afternoon, according to MarketSurge chart analysis. Its relative strength line reached a 52-week high, and had flashed a blue dot on its weekly chart Monday morning.

Shares have gained around 25% so far this month and have outperformed 93% of stocks that IBD tracks. But Rambus' IBD Timeliness Rating of A indicates a potential for positive price performance over the next 12 months.

The stock has shown big swings as reflected in its 21-day average true range of 6%, which is higher than the IBD Methodology target of 5% or less.

Mutual funds own 63% of shares, and have increased their positions in Rambus stock for five straight quarters, according to IBD Stock Checkup.

Profit Grows But Slows

"Leveraging our core expertise in signal- and power-integrity, we are well positioned amid strong secular trends in data center and AI to drive long-term profitable growth," Rambus Chief Executive Luc Seraphin said in the company's third-quarter earnings report.

Its third-quarter profit grew 29% to 63 cents per share. The pace of growth has decelerated, with the increase being the smallest in eight quarters. Rambus sales climbed 23% to $178.5 million, also at a slower pace than the 41% and 30% growth in the prior two quarters.

The company also gave a fourth-quarter forecast of licensing billings to run $60 million to $66 million, with royalty revenue at $59 million to $65 million. The company also predicted product sales of $94 million to $100 million, with contract and other revenue at $25 million to $31 million.

Analysts expect fourth-quarter profit of 68 cents per share, or 21% growth, on total sales of $188.1 million, for a 17% increase. Meanwhile, FactSet earnings estimates for full-year 2025 have recently been revised upward to $2.50 per share, or a 38% jump. But 2026 growth is expected to slow to 19% in 2026.

Finally, Rambus stock holds Composite and Earnings Per Share Ratings of 98 out of a best-possible 99.

Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.

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This article was originally published on Investor's Business Daily