Lam Research: Driving the Chip Revolution, One Layer at a Time

July 3, 2025

This article was written by Nikita Vorobyoff, Investment Analyst at I Know First

Introduction

This Lam Research stock analysis highlights the company’s financial performance, semiconductor equipment business, and competitive market position. Investors and analysts alike can gain insights into LRCX’s role within the semiconductor industry and its future growth potential.

Lam Research Stock Analysis: Company Overview & History

Lam Research Corporation, established in 1980, is a leading global provider of water fabrication equipment and services to the semiconductor industry. The corporation, headquartered in Fremont, California, USA, is well-known in Asia, Europe, and the U.S. Lam Research’s area of expertise is designing, building, repairing, and maintaining semiconductor processing equipment for integrated circuit manufacturing. The business offers a variety of products, including VECTOR plasma-enhanced CVD products, SABRE electrochemical deposition products for copper interconnects, and ALTUS systems for tungsten metallisation applications.

Lam Research’s main source of income is providing equipment for the deposition, etch, and clean businesses. The business also provides services to semiconductor manufacturers, such as top memory and integrated device producers, who create logic devices, dynamic random-access memory, and non-volatile memory. Lam Research is renowned for its proficiency in advanced systems engineering, nanoscale applications, and the integration of materials, software, processes, and hardware to provide exact control at the atomic level.

Lam Research, which operates in a quickly changing industry, prioritizes research and development to preserve its competitive edge and spur advancements in semiconductor production. The firm offers various services to optimise equipment performance, including upgrades and repairs of non-leading-edge products, and has a strong customer support business group. The business also offers sophisticated packaging solutions that improve the effectiveness and performance of semiconductor devices, addressing back-end wafer-level packaging procedures. Our Lam Research stock analysis shows how the company’s advanced semiconductor equipment solutions contribute to its long-term profitability.

Key  Highlights of 2025

  1. Revenue Resurgence with AI-fueled Growth – reported FYI2025 revenue of $21.6 billion, a 17% increase YoY, fueled by rising tool demand from AI-related foundries and a sharp rebound in DRAM and 3D NAND orders. The memory market’s recovery and accelerated buildouts of AI infrastructure were pivotal contributors.
  2. AI Infrastructure Tailwinds—Intensify LRCX benefited directly from TSMC, Samsung, and SK Hynix’s surging capital expenditures on bandwidth memory (HBM3) and advanced packaging nodes. ITS ALTUS, SABRE, and Akara platforms are now widely adopted in 3nm/2nm AI production lines, helping LRCX cement its role in enabling generative AI growth. 
  3. Resilient China Revenue Despite Ongoing Restrictions—Despite sustained U.S. export controls, China remained a key revenue contributor (-29%), only slightly down from 31% in 2024. 

Key Competitors and Market Position of Lam Research (LRCX)

A key part of this Lam Research stock analysis is understanding how the company compares with competitors such as Applied Materials, ASML and Tokyo Electron Limited:

  • Applied Materials Inc. (AMAT)
  • ASML Holding N.V. (ASML)
  • Tokyo Electron Limited (TOELY)

Figure 1 – Comparable Companies Analysis

With the comparable companies analysis research, the valuation of LRCX ranges between $58,52$ and $116.20 per share, depending on the multiple used; in this example, the median was used.

  • The current price of LRCX is 95.00$, falling between the implied EV/EBITDA and P/E valuations.
  • Undervalued on Earnings Basis: Using the peer average P/E, LRCX is undervalued by over 20% 

The provided tables present a detailed financial forecast for Lam Research stock analysis, including its future revenue, expenses, operating cash flow, and key working capital and fixed assets assumptions from fiscal years 2021 through 2029. 

Figure 2 – Calculations for Unlevered Free Cash Flow

  1. Renue Growth: LRCX is expected to grow revenue from $17.14B in FY2025 to $25.09B in FY2029, reflecting healthy product margins and pricing margins
  2. Gross profit: In line with its consistent COGS to revenue ratio of 54%. Gross profit increases from $8.23B in FY2025 to $11.55B in FY2029, reflecting healthy product margins and pricing strength.
  3. EBITDA Growth: EBITDA expands from $11.17B to $12.89B

Figure 3 – Growth of Revenue, EBITDA, EBIT and NOPAT

LRCX Financial Performance & Stock Analysis

  • Unlevered Free cash Flow starts at $1.83 billion in 2024 and is projected to grow up to $13.39 billion by 2029, reflecting a consistent improvement in operating perfomanmce and capital discipline.

This robust expansion in free cash flow is fueled by: 

  • Top-line revenue growth, accelerating from $2.3 billion in 2024 to over $13.3 billion in 2029
  • Stable and improving gross margins, with average annual CapEx remaining below $700 million, supporting both growth and liquidity
  • Disciplined capital expenditure, with average annual CapEX remaining below $700 million, supporting both growth and liquidity
  • Efficient working capital management with NWC improvements driving incremental cash generation each year. 

The projection highlights Lam’s ability to generate substantial operating cash, providing ample capital for:

  • Continued R&D investment in atomic-scale engineering and next-gerenration systems
  • Strategic acquisitions to bolster their growth LRCX will have enough cash to acquire firms to boost their infrastructure capabilities. 
  • Singnificant shareholders’ returns, through buybacks and dividends

With the Cash flow nearly 5x growth from 2024 to 2029, Lam demonstrates a powerful cash-generating engine, setting the stage for long-term value creation. 

With the growth represented in the figure 4 below

Figure 4- Cash Flow Growth

LRCX DCF valuation – Solid Fundamentals

Figure 5 – LRCX DCF model

Based on the analysis of Cash Flow growth and leveraging realistic projections and conservative assumptions (WACC of 9.2% and terminal growth of 3%). The implied share price is $144, which is nearly tripling from current levels of approximately 95$.

Figure 6- Lam Research stock analysis chart

On this chart, we can see the price of LRCX for the past year, with 16% growth left to reach the previous all-time high. The price of 113.95 will be the next level of resistance for LRCX to break through the highs. 

Figure 7 – Senstivity Table

With our sensitivity analysis in the worst-case scenario of 2% growth and 10.2%. WACC, the implied share price is still $113.

Growth Catalysts of LRCX

Figure 9 – Product Distribution by Region and Segments for LRCX

You can read Investing.com full semiconductor market outlook for 2025 for more insights.

  1. AI & High-Performance Computing Tailwinds 

Lam is at the forefront of riding the AI-driven semiconductors boom. Q3 2025 Revenue reached a record of 4.72 billion. up24% YoY, fueled mainly by the demand for AI chips from TSMC and Samsung

  • DRAM division: revenue rose ~27% YoY, boosted by high-bandwidth memory (HBM) and DDR5 upgrade. According to Finviz (LRCX’s memory strength: Will DRAM and NAND Fuel Future Gains?) 
  • NAND (NVM division): Grew ~21% YoY, driven by transitions >256-layer 3D NAND to support AI workloads.

2. Resilient Service Revenue – installed base services provide a stable recurring stream.

Lam’s Customer Support Business Group (CSBG) is evolving into a reliable recurring revenue engine. Q3 CSBG revenue reached $1.68 billion, a 21% increase year over year.

Annual results reinforce this: the March quarter saw customer service, spares, and upgrades (Reliant product line) forming a stable, high-margin revenue anchor.

3. China Diversification – Supply Chain reorientation helps.

Even with regulatory headwinds in China, Lam delivered a strong performance:

  • China accounted for 31% of Q3 revenues, with Taiwan and Korea each contributing 24%
  • Management confirms that supply chain agility and diversified exposure across Asia (Taiwan, Korea, U.S.) effectively mitigate geopolitical risk. Taiwan is 24%, Korea is 24%, and China is 31%, with these being the highest revenue regions for LAM. 

4. Advanced Packaging & Materials Excellence 

Lam is scaling innovations in advanced wafer-level packaging (WLP) and next-gen material processes, crucial for AI and HPC chips: 

  • Tools like ALTUS Halo and Striker SPARC ALD play pivotal roles in NAND transitions to improve performance and efficiency. 

(https://newsroom.lamresearch.com/molybdenum-metallization-ai-revolution) 

Risks

  1. Cyclicality in Semiconductor Capital Spending 

The semiconductor equipment industry is notoriously cyclical, driven by memory pricing fluctuations and FAB utilization. Lam experienced a sharp slowdown in memory-related capital expenditure in recent years. CFO Doug Bettinger said flash-memory system orders were “The Weakest since the last generation” during a 2023 quarter. Despite China’s business boom, overall memory demand took a hit, leading LRCX to forecast weaker revenue amid reduced memory fab activity . 

(https://www.reuters.com/technology/lam-forecasts-revenue-below-estimate-chip-industry-faces-weak-demand-2023-10-18)

2. Geopolitical & Export Control Headwinds 

U.S. Export restrictions targeting China’s semiconductor ambitions pose a clear near-term revenue risk for Lam. In December 2024, the U.S. added over 140 Chinese companies to the Entity List while expanding export controls on advanced equipment and HBM chips. However, with the recent development of the U.S. and China striking their new trade deal, the negotiations haven’t led to any lifts of restrictions put by the U.S. in December 2024. 

(https://www.reuters.com/technology/us-targets-chinas-chip-industry-with-new-restrictions-2024-12-02)

(https://www.ft.com/content/2e02741b-cc63-434d-ad8c-3d0e5c4df59f)

3. Customer Concentration Risk 

Lam’s business is heavily reliant on partners outside the U.S. that can be easily influenced by the tariffs. TSMC, Samsung, Micron, and SK Hynix are its biggest trading partners. A shift in any key customer’s capital expenditure plans can influence revenue and, therefore, LAM’s profits, especially in memory or AI chip infrastructure. 

I Know First Model Analysis for LRCX

Figure 8 – IKR analysis of LRCX

The I Know First model is currently showing a strong bullish signal of 1.28 for LRCX over the next month. This reading suggests there is a solid upward momentum in the stock, backed by accelerating revenue growth, largely driven by AI-related demand—specifically from AI data centers and the broader growth in semiconductor services.

While the signal strength is encouraging, we must also consider the predictability score of 47%. This means that historically, the model has been correct just slightly more than half the time in predicting movements for this stock in this timeframe. So while the upside signal is strong, it doesn’t guarantee certainty—hence, we need to be tactical in how we approach this trade for the span of 1 month, with the increasing predictability of 71% for the 1-year span.

The model also shows consistently strong signals across longer timeframes (from one month up to a year), further reinforcing the idea that LRCX is in a favorable growth trend. The stock is benefiting from structural tailwinds in the semiconductor space—particularly due to demand from AI chips and memory technologies, where Lam Research holds key technologies in wafer fabrication equipment.

Given the mix of strong signals but moderate predictability, the smart approach here isn’t to go all-in, but rather to size the position cautiously—around 25-33% of a typical full position. This limits downside risk while still allowing participation in the upside.

A stop-loss around $94 per share is recommended—this marks a reasonable level below current prices, guarding against a significant breakdown if the momentum unexpectedly reverses. On the upside, aiming for a target near $113 per sharecreates a favorable risk-reward ratio of roughly 1:4.5—meaning for every dollar risked, there’s a potential reward of $4.50.

This approach gives us a disciplined framework:

  • Participate in the upside fueled by AI’s growing demand for advanced chips and manufacturing equipment.
  • Limit risk if the trade doesn’t go our way.

LRCX remains one of the key players in the semiconductor supply chain, with strong exposure to AI-driven capital expenditures from industry giants like Nvidia and leading memory producers.

In summary, we’re capitalizing on:

  • Sensible trade management with controlled position sizing and a clear stop-loss strategy.
  • Strong bullish technical signal.
  • Solid business fundamentals driven by AI and semiconductor demand.

AI Forecast:

Importantly, this is not the first time our algorithm has successfully identified Lam Research as a top performer. In a previous forecast published on March 22, 2024, Lam Research was flagged as a long opportunity, delivering a 16.2% return by July 10, 2024—again beating the S&P 500 benchmark, which returned only 8.3% during the same period.

These consistent results highlight the accuracy and repeatability of I Know First’s Al system in identifying asymmetric opportunities like Lam Research ahead of broader market recognition.

Conclusion

This Lam Research stock analysis highlights both the opportunities and risks that investors should consider before adding LRCX to their portfolios, as it occupies a unique position in the semiconductor industry. It is deeply undervalued, considering its DCF model, and undervalued compared to its peers, but it has a great upside potential of reaching new all-time highs.

The I Know First algorithm has issued a strong bullish signal of 1.28 for LRCX over the next month, driven by accelerating revenue growth from AI data centers and semiconductor services. While the 47% predictability scoresuggests only moderate historical accuracy, the strong momentum and consistent signals across longer timeframes make this a compelling opportunity.

A smart approach here is cautious position sizing—around 25-33% of a typical allocation—with a stop-loss at $94 to limit downside and a target near $113, offering a 1:4.5 risk-reward ratio. This strategy allows us to capture upside while managing risk.

Notably, this isn’t the first time our model has correctly flagged LRCX. In a forecast from March 22, 2024, the stock returned 16.2% by July 10, 2024, outperforming the S&P 500’s 8.3% in the same period.

This highlights the model’s ability to consistently identify strong opportunities, such as Lam Research, ahead of the broader market.

  • Current Price: 95$ 
  • Target Price(DCF): $145
  • Target Price(P/E-competitors based): $116
  • Target price for all time high + strong signal from our Algorithm: 113$
  • Upside Potential (Best Case): +53%

LRCX offers one of the most asymmetric opportunities in the semiconductor space.

References 

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