Silicon Motion

Silicon Motion ships more solid state drive controllers than any other company, and that business grew about 45 percent over the past year. The industry is moving to a faster connection standard called PCIe Gen 5, and those newer chips sell for meaningfully more money than the ones they replace. Net margins are 22 percent, which is strong for a company that designs chips instead of manufacturing them.

Its new enterprise controller has been sampled with more than a dozen data center customers, and five major ones are expected to start buying in the second half of 2026. Silicon Motion also makes boot drives that go inside the networking equipment sitting next to AI chips, which means it grows with the size of the whole system rather than just the chip count. That category grew more than 750 percent last quarter.

Six customers made up 66 percent of revenue last year. If one of them switches suppliers or works down its own inventory, revenue can swing hard in a single quarter. About 56 percent of sales go to China, which layers political risk on top of the customer concentration.

Inventory climbed to 515 million dollars last quarter while operating cash flow ran negative at 31 million dollars, as the company stocked up ahead of demand it expects later this year. If customer orders slip, that inventory could be written down and the earnings picture would look very different.