Lam Research Stock Trades at a Discount: Time to Hold or Cash Out?

Lam Research Corporation LRCX, 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, Marvell Technology MRVL and Cirrus Logic CRUS, which have struggled to regain momentum.YTD Price Return PerformanceImage Source: Zacks Investment ResearchDespite 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 RatioImage Source: Zacks Investment ResearchAI and Datacenter Chips: Long-Term Catalysts for LRCXLam 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 QuoteThe 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 EdgeLam 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 LRCXLam 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 ResearchWhile 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 NowWhile 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.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lam Research Corporation (LRCX): Free Stock Analysis Report Marvell Technology, Inc. (MRVL): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Cirrus Logic, Inc. (CRUS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks