Lam Research: Powering the Next Wave of AI Chip Growth

A Silent Giant at the Heart of the AI Supply Chain

Lam Research (NASDAQ: LRCX) isn’t a flashy AI stock. It doesn’t design GPUs or make headlines with trillion-dollar valuations. But beneath the surface of the AI revolution, Lam’s wafer fabrication equipment (WFE) sits at the center of the semiconductor manufacturing process, powering the chips that power the AI age.

The company’s dominance in etch and deposition tools, critical for creating high-density logic and memory chips, has made it indispensable to leading chipmakers like TSMC, Samsung, and Micron. As AI workloads push the boundaries of performance and efficiency, Lam’s precision equipment has become a key enabler of progress.

Strong Momentum and Record Results

Lam Research continues to deliver impressive operational consistency. In its most recent quarter (FQ4 2025), Lam reported 34% YoY revenue growth and 65% EPS growth, marking its 13th consecutive double-beat quarter.

Gross margins topped 50% for the first time since the Lam–Novellus merger in 2012, while operating margins hit a record 34.4%.

The company’s foundry and memory divisions remain its growth backbone, together contributing over 90% of total revenue. These segments are directly tied to AI-driven demand for high-bandwidth memory (HBM), NAND expansion, and next-generation logic nodes, all areas seeing accelerated CAPEX from hyperscalers and fab operators.

Innovation at the Cutting Edge

Lam’s growth isn’t just about market cycles, it’s driven by new technology. As chipmakers reach the limits of how small transistors can get, they’re now focusing on 3D stacking, advanced packaging, and chiplet designs to keep improving performance.

Lam’s new VECTOR® TEOS 3D system helps solve one of the biggest challenges in these new chip designs, how to make multi-layer chips stable and strong. The system can fill the gaps between stacked chips with thick, solid material, preventing cracks and improving heat control.

Lam has also teamed up with JSR Corporation and Inpria to develop better EUV dry resist technology, which is essential for producing the next generation of ultra-small chips (2 nanometers and below). By combining Lam’s expertise in material deposition with Inpria’s advanced photoresist materials, the partnership strengthens Lam’s position in high-precision chipmaking, putting it in direct competition with Applied Materials and Tokyo Electron.

Financials & Valuation: A Long-Term Play

Lam currently trades at a forward P/E of ~31x, above the semiconductor equipment sector’s average of 25x. While this signals a premium valuation, it reflects justified confidence in Lam’s double-digit growth trajectory and superior profitability metrics.

• Gross Margin: ~50%

• Operating Margin: ~32%

• Free Cash Flow Margin: ~29%

• ROIC: ~38%

With $6.4 billion in cash versus $4.8 billion in obligations, Lam’s balance sheet remains one of the strongest among peers, even generating net interest income in a high-rate environment.

Wall Street forecasts FY2026 EPS of $4.49 and FY2027 EPS of $5.15, implying 8–15% annualized growth.

Technical Analysis

• Longer-term uptrend remains intact with 100d and 200d MA still sloping up, while short-term trends looks to be taking a breather with 20d MA flattening out

• As price approaches 170 resistance, selling pressure appears to be present

• Immediate supports remains to be around 130 - 140, where buyers returned to accumulate on dips

• As long as price can break and hold above 170 resistance, with a new 1GT Bullish signal, would not rule out more upside towards 200 psychological resistance

Final Take

Lam Research may not enjoy the spotlight like Nvidia or TSMC, but it’s one of the most critical enablers of the AI and high-performance computing (HPC) ecosystem. With expanding margins, breakthrough innovations, and a strong balance sheet, Lam offers investors exposure to the AI hardware supercycle, with a blend of growth and resilience rarely found in the semiconductor sector.

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Sources:
1. Micron vs. Lam Research: Which Semiconductor Stock Is a Better Buy?. Available at: https://www.nasdaq.com/articles/micron-vs-lam-research-which-semiconductor-stock-better-buy
2. Lam Research Corporation (LRCX): A Bull Case Theory Available at: https://ca.finance.yahoo.com/news/lam-research-corporation-lrcx-bull-191841251.html

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