AMAT vs. LRCX: Which Semiconductor Giant Stands Out for Investors?

Applied Materials AMAT and Lam Research LRCX stand out as key suppliers of semiconductor fabrication equipment like Chemical Vapor Deposition, Atomic Layer Deposition (ALD), Physical Vapor Deposition, Chemical Mechanical Planarization Epitaxy and etching tools to serve various stages of chip manufacturing.

With the AI boom to continue driving growth for the semiconductor industry, the question remains: Which stock is a better investment pick today? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case of AMAT Stock

Applied Materials is a major manufacturer of semiconductor fabrication equipment, covering deposition, etching and inspection, serving the most crucial stages of chip manufacturing. Applied Materials’ use of AI-driven semiconductor technology has created long-term growth prospects for it.

AMAT’s Semiconductor Systems segment is shining on the back of strong demand for foundry-logic, DRAM and NAND products. AMAT is experiencing strong wins in deposition, etch, and new DRAM solutions, leading to deliver record revenues in the third quarter of fiscal 2025.

Applied Materials’ Semiconductor Systems’ revenues touched $5.43 billion in the third quarter, up 10% year over year. Its long-term growth drivers include the growing usage of leading-edge logic, including gate-all-around and backside power delivery, growing demand for next-gen DRAM, advanced packaging and power semiconductors.

AMAT has been continuously ramping up its R&D investments. For instance, AMAT set up the Equipment and Process Innovation and Commercialization center for research, which is expected to be operational by 2026. The company is also collaborating with organizations like CEA-Leti and increasing its overall R&D expenses.

However, AMAT has acknowledged a slowdown in the IoT, Communications, Automotive, Power, and Sensors (ICAPS) segment, which had been a key growth driver in recent years. Moderating growth at ICAPS after a strong 2023-2024 cycle makes us wary of a potential drag on AMAT’s overall performance.

These factors are likely to affect the bottom line of the company. The Zacks Consensus Estimate for fiscal 2025 signals single-digit growth in the bottom line. The consensus mark for fiscal 2025 and 2026 EPS indicates year-over-year growth of 8.21% and 0.35%, respectively.

The Case for Lam Research Stock

Lam Research has long been a pillar of the chip equipment world, especially in etch and deposition technology, which are critical for HBM and advanced packaging technologies essential for AI workloads. These leading-edge technologies are helping it capitalize on the opportunities from the booming demand for AI and datacenter chips, which require advanced fabrication technologies.

LRCX’s ALTUS ALD tool utilizes the capabilities of metal molybdenum to ensure high-precision deposition of low-resistivity, void-free molybdenum metallization that enables chip makers to develop memory and logic chips for AI workloads. Its Aether platform allows extended single-print patterning, higher resolution and pattern fidelity, enabling chip manufacturers to produce chips with higher performance, greater density, and energy efficiency, ideal for AI chip manufacturing.

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 Research’s cutting-edge fabrication solutions.

These trends are likely to support Lam Research. The Zacks Consensus Estimate for LRCX’s fiscal 2026 top and bottom lines are showing double-digit growth. The consensus mark for fiscal 2026 and 2027 EPS indicates year-over-year growth of 14% and 15%, respectively.

Stock Price Performance and Valuation of AMAT and LRCX

Year to date, shares of Applied Materials and Lam Research have lost 41.4% and 40.5%, respectively.

Both AMAT and LRCX are trading at forward 12-month price to sales multiples of 6.45X and 10.32x, respectively.

Conclusion: LRCX vs. AMAT

Both AMAT and LRCX are essential players in the semiconductor supply chain space, but LRCX has a stronger growth profile due to its superior etching and deposition technology for AI chip manufacturing. While AMAT trades at a lower valuation and benefits from diverse semiconductor equipment offerings, its growth outlook is more uncertain due to the slowing growth and the escalating U.S.-China trade war.

While LRCX sports a Zacks Rank #1 (Strong Buy), AMAT has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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