"Don't overestimate how dumb they are" is logical and correct. However, because "how dumb they are" is in the sentence, it emphasizes, well, that they are dumb, which is not what the OP intended to say.
Writing it as "don't underestimate how smart they are" is more readable, although logically, it's stating the same thing.
Even better, I would have written it as "don't underestimate how smart they can be."
"Don't overestimate how dumb they are" is logical and correct. However, because "how dumb they are" is in the sentence, it emphasizes, well, that they are dumb, which is not what the OP intended to say.
Writing it as "don't underestimate how smart they are" is more readable, although logically, it's stating the same thing.
Even better, I would have written it as "don't underestimate how smart they can be."