Lam Research Corporation (LRCX): A Bull Case Theory

We came across a bullish thesis on Lam Research Corporation on Rijnberk InvestInsights’s Substack by Daan | InvestInsights. In this article, we will summarize the bulls’ thesis on LRCX. Lam Research Corporation's share was trading at $154.79 as of December 1st. LRCX’s trailing and forward P/E were 34.17 and 31.55 respectively according to Yahoo Finance.

Lam Research (LRCX), with a $180 billion market cap, is one of the world’s most essential yet underappreciated semiconductor equipment companies. As the third-largest player globally, it provides deposition, etch, and cleaning tools to leading foundries such as TSMC, Intel, Samsung, and GlobalFoundries—core processes that enable advanced logic, memory, and AI chips.

Lam’s leadership in etch and deposition, which grow faster than the overall wafer fab equipment market, positions it at the center of secular semiconductor and AI hardware expansion. Its Customer Support Business Group adds resilience through recurring, high-margin service revenue, having remained stable through multiple industry cycles.

Structurally, Lam’s business is capital-light, generating a 29% FCF margin, a 35%+ ROIC, and a 50%+ ROE, while returning nearly all free cash flow to shareholders through dividends and buybacks. Over the past decade, revenue and EPS have compounded at 14% and 24%, respectively, supported by disciplined management and technological leadership. Despite this, Lam remains overshadowed by designers like Nvidia and AMD, making it a “quiet compounder.”

Its outlook remains robust, driven by gate-all-around transistors, 3D NAND, and high-bandwidth memory—all of which require more Lam tools per wafer. Management projects double-digit growth through 2028, underpinned by a clean balance sheet and strong cash generation. However, after a 90% share appreciation in 2025, the stock appears fully valued. The analyst maintains a Hold rating with accumulation below $110 and a FY27 target price of $155, viewing Lam as a long-term compounder but not an immediate buy.

Previously we covered a bullish thesis on Lam Research Corporation (LRCX) by The Antifragile Investor in May 2025, which highlighted its dominance in etch and deposition tools and expanding service revenues. The stock has appreciated by about 86.96% as the thesis played out. The thesis still stands, though Rijnberk InvestInsights shares a similar view but stresses valuation caution.

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 the second quarter which was 91 in the previous quarter. While we acknowledge the 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.