Lam Research Soars 71% in Six Months: Book Profit or Hold LRCX Stock?

Lam Research Corporation LRCX has surged 70.8% in the past six months, comfortably outperforming the broader Zacks Electronics – Semiconductors industry, which rose 54.1%.

While many semiconductor names have rallied, LRCX’s gains stand out, even among top peers, including KLA Corporation KLAC, ASML Holding N.V. ASML and Applied Materials, Inc. AMAT. Shares of KLA Corporation, ASML Holding and Applied Materials have soared 48.6%, 32.8% and 31.8%, respectively.

LRCX 6-Month Price Return Performance

This sharp outperformance signals that investors are placing high confidence in Lam Research’s growth outlook despite broader concerns like geopolitical tensions and global trade issues. However, the robust share price appreciation raises the question: Should investors continue holding LRCX stock or book profits?

AI and Data Center Chip Trends Power LRCX’s Momentum

Lam Research is benefiting from powerful shifts in semiconductor demand, particularly around artificial intelligence (AI) and data center chips. These advanced chips require complex manufacturing, and Lam Research provides the essential tools, like deposition and etching systems, needed to build them.

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 in 2025. Additionally, the industry’s migration to backside power distribution and dry-resist processing presents growth opportunities for LRCX’s cutting-edge fabrication solutions.

These trends are aiding Lam Research’s financial performance. In the fourth quarter of fiscal 2025, the company reported revenues of $5.17 billion, up 34% year over year, and non-GAAP EPS of $1.33, highlighting a 64% increase.

Lam Research Corporation Price, Consensus and EPS Surprise

Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote

Expanding its manufacturing operations in Asia has also helped the company lower costs and improve margins. In the fourth quarter of fiscal 2025, Lam Research’s non-GAAP operating margin rose to 34.4%, up 370 basis points from last year, which is impressive, considering the challenging macroeconomic environment.

LRCX’s Valuation Still Looks Attractive

Even after the robust rally, Lam Research stock doesn’t look expensive. LRCX currently trades at a forward price-to-earnings (P/E) multiple of 29.24, which is significantly lower than the industry’s 36.51. The company’s discounted valuation multiple aligns with its long-term growth potential.

LRCX Forward 12-Month P/E Ratio

Compared with major semiconductor stocks, LRCX trades at a lower P/E multiple than KLAC and ASML, while at a premium to AMAT. At present, KLA Corporation, ASML Holding and Applied Materials have forward 12-month P/E multiples of 30.41, 33.94 and 21.23, respectively.

Near-Term Challenges Persist for Lam Research

While Lam Research’s long-term growth outlook remains strong, several near-term challenges warrant caution. One of the primary concerns is the potential for escalating U.S.-China trade tensions, which could impact its sales in China, a market that represents a significant portion of its revenues.

In fiscal 2025, approximately 34% of Lam Research’s revenues were generated in China, a sharp decline from 42% in fiscal 2025. Given the ongoing restrictions on technology exports to China, LRCX faces heightened risk, creating increased uncertainty and lower visibility in the near term.

The semiconductor market’s cyclical nature poses a risk to Lam Research’s revenue consistency. NAND pricing pressures and the cautious capital spending among memory and logic clients could limit growth in the near term.

Lam Research’s extensive reliance on these segments makes it vulnerable to cyclical downturns. However, as memory spending is projected to rebound by late 2025, the company may weather this period of reduced spending, but the short-term outlook remains uncertain.

Final Thoughts: Hold LRCX Stock for Now

Lam Research’s attractive valuation, strong technological foundation and strategic focus on high-growth markets like AI and HPC make it a compelling long-term investment. While near-term headwinds such as geopolitical risks and cyclical pressures remain, the company’s innovation and operational efficiency provide a solid foundation for future growth. Considering these factors, holding LRCX stock appears to be the most prudent strategy for investors.

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.

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This article originally published on Zacks Investment Research (zacks.com).

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