Lam Research Corporation (LRCX): A Bull Case Theory

We came across a bullish thesis on Lam Research Corporation on Swiss Transparent Portfolio's Substack. As of 19ᵗʰ September, Lam Research Corporation's share was trading at $126.92. LRCX's trailing and forward P/E were 30.58 and 29.72 respectively according to Yahoo Finance.

Lam Research Corporation (LRCX) is a key player in the semiconductor industry, particularly in the etch and deposition segments. The company's recent performance has been impressive, with a record-breaking quarter, revenue growth of 23.7% in FY2025 to $18.44B, and a June 2025 quarter that saw revenue increase by 33.6% YoY. Lam's business spans two main segments: Systems, which includes sales of new wafer fabrication equipment, and Customer Support, which provides services, spare parts, and equipment upgrades. The company's growth drivers are rooted in technological sea changes that play directly into Lam's strengths in deposition and etch, such as the explosion of AI and data center chips, memory technology transitions, and advanced packaging & chiplet architecture.

The company's valuation is reasonable compared to peers like ASML and Applied Materials, with a forward earnings multiple in the mid-high 20s. Lam's growth trajectory is strong, with analysts expecting earnings growth at a mid to high-single-digit percentage annually over the next couple of years. The company's PEG ratio is around 2.5-3 on a 1-year view, or ~1.3 on a 5-year expected basis, which is not extremely cheap but not unreasonable for a high-quality business. Lam's leadership team, including CEO Tim Archer and CFO Douglas Bettinger, has deep industry expertise and a proven track record of navigating the company's growth and cycles.

Lam Research's long-term outlook is compelling, with secular tailwinds driving growth in the semiconductor industry. The company's served market is expected to grow faster than the overall wafer fab equipment market, driven by trends like GAA, 3D NAND, and advanced packaging. However, risks include cyclicality, geopolitical tensions, competition, and technological shifts. Despite these risks, Lam's dominant market position, superb margins, and robust free cash flow generation make it a compelling investment opportunity. The stock's performance has been strong, but it still trades at reasonable earnings multiple, making it an attractive buy for long-term investors who can stomach volatility.

Previously, we covered a bullish thesis on Lam Research Corporation, and the stock has appreciated by 51.58% because our thesis has played out since then. The past thesis by Not Mentioned, published on May 2025, highlighted Lam Research Corporation's quiet control over semiconductor manufacturing. In contrast, Swiss Transparent Portfolio shares a similar bullish view but emphasizes Lam's strengths in the semiconductor industry, particularly in etch and deposition segments, driven by AI and data center chip growth.

Lam Research Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 85 hedge fund portfolios held LRCX at the end of second quarter which was 91 in the previous quarter. While we acknowledge the risk and potential of LRCX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.