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Lam Research Stock Trades at a Discount: Time to Hold or Cash Out?
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Lam Research Corporation (LRCX - Free Report) , a major player in semiconductor fabrication equipment, has been on a steady rebound in 2025, rising 7.6% year to date (YTD) after a rough 2024, which saw its shares drop 7.8%. This recovery has outpaced key semiconductor peers such as Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and Cirrus Logic (CRUS - Free Report) , which have struggled to regain momentum.
YTD Price Return Performance
Image Source: Zacks Investment Research
Despite the recent rally, Lam’s stock remains attractively valued, trading at a forward 12-month price-to-earnings (P/E) ratio of 20.65, well below the Zacks Electronics – Semiconductors industry average of 25.51. This discounted valuation, coupled with strong AI-driven growth catalysts, makes a compelling case for holding the stock for long-term gains.
LRCX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
AI and Datacenter Chips: Long-Term Catalysts for LRCX
Lam Research is benefiting from the booming demand for AI and datacenter chips, which require advanced fabrication technologies. The company’s deposition and etch solutions are critical for producing high-bandwidth memory (HBM) and advanced packaging technologies, essential for AI workloads.
In 2024, Lam Research’s shipments for gate-all-around nodes and advanced packaging exceeded $1 billion, and management expects this figure to triple to more than $3 billion by 2025. Additionally, the industry’s migration to backside power distribution and dry-resist processing presents further growth opportunities for Lam’s cutting-edge fabrication solutions.
With AI-driven investments accelerating, Lam’s leading position in etch and deposition makes it a key beneficiary of the next semiconductor spending cycle.
These trends are aiding Lam Research’s financial performance. In the second quarter of fiscal 2025, the company reported revenues of $4.38 billion, up 16.4% year over year, and earnings per share (EPS) of 91 cents, highlighting a 7% increase.
Lam Research Corporation Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for fiscal 2025 signals continued stability in its core business. The consensus mark for revenues and EPS indicates year-over-year growth of 18.8% and 24.8%, respectively.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Lam Research’s continued investment in research & development and product innovation is paying off. The company’s newly launched Cryo 3.0 technology is setting new performance benchmarks for high-aspect-ratio dielectric etch applications, giving Lam a technological edge in next-gen semiconductor manufacturing.
Additionally, Lam Research’s Aether dry-resist solution has been selected as the production tool of record for high-bandwidth DRAM at a major memory manufacturer. This underscores Lam Research’s growing influence in the memory fabrication market, particularly as HBM demand soars due to AI and HPC growth.
Moreover, Lam has expanded its manufacturing footprint in Asia, improving cost efficiencies and responsiveness to customer demand. These strategic moves allowed Lam to achieve a 160-basis point expansion in operating margins in 2024 despite broader industry challenges.
NAND Recovery: A Potential Growth Driver for LRCX
Lam Research is also positioned to benefit from the rebounding NAND flash market. After a prolonged downturn, NAND spending is showing early signs of recovery.
Although industry-wide NAND investments are still focused on technology upgrades rather than capacity expansion, Lam Research’s molybdenum (Moly) and carbon gap fill solutions are gaining traction. Management expects these technologies to drive hundreds of millions of dollars in NAND-related revenues in 2025.
With two-thirds of the NAND industry still operating below 200-layer technology, the ongoing transition to higher-layer counts supports a multi-year upgrade cycle. This trend bodes well for Lam’s revenue trajectory in the coming years.
Near-Term Risks Persist for Lam Research
While Lam Research’s long-term outlook is promising, near-term risks persist.
U.S.-China trade tensions pose a significant challenge. China accounted for 31% of Lam Research’s second-quarter revenues, down from 37% in the prior quarter. The company also revealed that $700 million in expected sales from restricted Chinese customers will not materialize in 2025, creating a noticeable sales gap.
Additionally, declining demand for mature-node semiconductor equipment is weighing on Lam Research’s foundry business. Foundry revenues fell from 41% of system sales in the first quarter to 35% in the second quarter, reflecting weaker demand.
With Taiwan Semiconductor Manufacturing Company (TSMC) and other foundries slowing their mature-node spending, Lam Research’s growth in this segment could remain sluggish. Any further delays in leading-edge technology roadmaps by major foundries like TSMC, Samsung and Intel could dampen Lam Research’s near-term growth momentum.
Conclusion: Hold Lam Research for Now
While geopolitical risks and mature-node weakness could create short-term headwinds, Lam Research’s discounted valuation, solid financial performance and strategic focus on AI-driven growth make it a compelling long-term hold. The company’s expanding market share in AI and datacenter fabrication, coupled with innovative product launches, strengthens its competitive positioning.
Image: Bigstock
Lam Research Stock Trades at a Discount: Time to Hold or Cash Out?
Lam Research Corporation (LRCX - Free Report) , a major player in semiconductor fabrication equipment, has been on a steady rebound in 2025, rising 7.6% year to date (YTD) after a rough 2024, which saw its shares drop 7.8%. This recovery has outpaced key semiconductor peers such as Broadcom (AVGO - Free Report) , Marvell Technology (MRVL - Free Report) and Cirrus Logic (CRUS - Free Report) , which have struggled to regain momentum.
YTD Price Return Performance
Image Source: Zacks Investment Research
Despite the recent rally, Lam’s stock remains attractively valued, trading at a forward 12-month price-to-earnings (P/E) ratio of 20.65, well below the Zacks Electronics – Semiconductors industry average of 25.51. This discounted valuation, coupled with strong AI-driven growth catalysts, makes a compelling case for holding the stock for long-term gains.
LRCX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
AI and Datacenter Chips: Long-Term Catalysts for LRCX
Lam Research is benefiting from the booming demand for AI and datacenter chips, which require advanced fabrication technologies. The company’s deposition and etch solutions are critical for producing high-bandwidth memory (HBM) and advanced packaging technologies, essential for AI workloads.
In 2024, Lam Research’s shipments for gate-all-around nodes and advanced packaging exceeded $1 billion, and management expects this figure to triple to more than $3 billion by 2025. Additionally, the industry’s migration to backside power distribution and dry-resist processing presents further growth opportunities for Lam’s cutting-edge fabrication solutions.
With AI-driven investments accelerating, Lam’s leading position in etch and deposition makes it a key beneficiary of the next semiconductor spending cycle.
These trends are aiding Lam Research’s financial performance. In the second quarter of fiscal 2025, the company reported revenues of $4.38 billion, up 16.4% year over year, and earnings per share (EPS) of 91 cents, highlighting a 7% increase.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
The Zacks Consensus Estimate for fiscal 2025 signals continued stability in its core business. The consensus mark for revenues and EPS indicates year-over-year growth of 18.8% and 24.8%, respectively.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Strategic Investments Strengthen LRCX’s Competitive Edge
Lam Research’s continued investment in research & development and product innovation is paying off. The company’s newly launched Cryo 3.0 technology is setting new performance benchmarks for high-aspect-ratio dielectric etch applications, giving Lam a technological edge in next-gen semiconductor manufacturing.
Additionally, Lam Research’s Aether dry-resist solution has been selected as the production tool of record for high-bandwidth DRAM at a major memory manufacturer. This underscores Lam Research’s growing influence in the memory fabrication market, particularly as HBM demand soars due to AI and HPC growth.
Moreover, Lam has expanded its manufacturing footprint in Asia, improving cost efficiencies and responsiveness to customer demand. These strategic moves allowed Lam to achieve a 160-basis point expansion in operating margins in 2024 despite broader industry challenges.
NAND Recovery: A Potential Growth Driver for LRCX
Lam Research is also positioned to benefit from the rebounding NAND flash market. After a prolonged downturn, NAND spending is showing early signs of recovery.
Although industry-wide NAND investments are still focused on technology upgrades rather than capacity expansion, Lam Research’s molybdenum (Moly) and carbon gap fill solutions are gaining traction. Management expects these technologies to drive hundreds of millions of dollars in NAND-related revenues in 2025.
With two-thirds of the NAND industry still operating below 200-layer technology, the ongoing transition to higher-layer counts supports a multi-year upgrade cycle. This trend bodes well for Lam’s revenue trajectory in the coming years.
Near-Term Risks Persist for Lam Research
While Lam Research’s long-term outlook is promising, near-term risks persist.
U.S.-China trade tensions pose a significant challenge. China accounted for 31% of Lam Research’s second-quarter revenues, down from 37% in the prior quarter. The company also revealed that $700 million in expected sales from restricted Chinese customers will not materialize in 2025, creating a noticeable sales gap.
Additionally, declining demand for mature-node semiconductor equipment is weighing on Lam Research’s foundry business. Foundry revenues fell from 41% of system sales in the first quarter to 35% in the second quarter, reflecting weaker demand.
With Taiwan Semiconductor Manufacturing Company (TSMC) and other foundries slowing their mature-node spending, Lam Research’s growth in this segment could remain sluggish. Any further delays in leading-edge technology roadmaps by major foundries like TSMC, Samsung and Intel could dampen Lam Research’s near-term growth momentum.
Conclusion: Hold Lam Research for Now
While geopolitical risks and mature-node weakness could create short-term headwinds, Lam Research’s discounted valuation, solid financial performance and strategic focus on AI-driven growth make it a compelling long-term hold. The company’s expanding market share in AI and datacenter fabrication, coupled with innovative product launches, strengthens its competitive positioning.
Lam Research carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.