SAN FRANCISCO -- It looks like Rambus (RMBS) - Get Report is having a good laugh over critics who have been trashing for months the growth prospects for the designer of revolutionary computer memory chips. The question remains, is it the last laugh?

Rambus closed up 18% at 115 1/4 Thursday after touching an all-time high of 116 5/16 on a third-quarter earnings surprise and an upgrade from

Hambrecht & Quist

analyst David Wehner to buy from market perform. The degree of the rise surprised even Wehner. The stock's closing price prior to his upgrade Thursday morning was 97 9/16 and Wehner told investors it could rise to 125 within the next year. "It made half that distance in a day," he says. (H&Q has an underwriting relationship with Rambus.)

Meanwhile, investors who were betting against Rambus using put options couldn't get out of them fast enough. On Thursday, July 115 puts, which expire Friday, fell 6 1/4 ($625) to 2 1/2 ($250) per contract on the Chicago options exchange. Open interest in the strike was 246 contracts, while volume totaled over 1,000 contracts.

But is Rambus over the hump? Not yet. The biggest concern so far among Rambus investors has been that the company's key supporter,

Intel

(INTC) - Get Report

, would support alternative technology. And while Intel keeps saying that the Rambus-based Camino chipset -- needed to connect Rambus memory to Intel's chips -- is on track, it hasn't clearly said it won't come out with an alternative.

"That would be a big problem for the stock," Wehner says. "That obviously puts Rambus at great risk."

And Rambus' current valuation -- at 115, it is 30 times the

First Call

estimate for 2001 earnings -- depends on a robust memory market. "If the memory market is smaller than we expect, Rambus will be smaller than we expect," Wehner says. That could happen, he says, if consumers flock to so-called "dumb" Internet terminals that require less memory.

Controversy has surrounded the company ever since February, when news first hit that Intel was having

problems with its Rambus-based chipset. Other news tidbits followed to drive down Rambus stock from its previous high of 109 1/2 on Jan. 11: Makers of Rambus testing equipment were having problems; memory

makers weren't committing to large-scale production of Rambus DRAM; PC makers were

balking at buying more expensive Rambus-based chips.

The biggest fear of Rambus investors was that Intel would back away from its staunch support and come out with a chipset that supports PC-133 MHz SDRAM, a format seen as both an incremental improvement over current memory products and a stopgap until royalty-free alternatives to Rambus can be developed.

Now investors seem to be driving up the stock on small tidbits of positive news and the lack, so far, of negative news. Even before the company's earnings report, Rambus was on a steep upward path: Between June 1 and Wednesday's close, the stock had risen 47%.

So what's happening? Intel has sent PC manufacturers samples of its chipset, something that technology analysts have said Intel wouldn't do until after it fixed all bugs. Makers of testing equipment are beginning to get orders from memory makers. And at Rambus, CFO Gary Harmon says that about a quarter of the engineering staff was recently pulled off R&D to help PC makers and memory companies with last-minute tinkering of their Rambus-based products.

Rambus-based PCs will likely be displayed for the first time at Intel's semiannual developer's forum in Palm Springs on Aug. 31, Harmon says. And the systems will hit the market in conjunction with Intel's launch of the chipset later this quarter.

But Harmon himself is isn't laughing yet. "We don't rest easy until after the launch and until we see Rambus systems on the market," he says.