Lam Research Gains 18% in a Month: Should You Buy the Stock Now?
Lam Research Corporation LRCX has seen its share price soar 18.4% over the past month. This surge has significantly outperformed the broader Zacks Computer and Technology Sector, which gained 11% during the same period.
This outperformance raises the question: Should investors accumulate the stock or book profits and exit the investment?
Trade Truce Ignites Rally in LRCX Shares
Lam's recent surge has been driven in part by improving sentiment around U.S.-China trade. Reports of a temporary tariff rollback between the two nations have reassured markets. The United States agreed to reduce tariffs on Chinese imports to 30% from 145%, while China will cut duties on U.S. goods from 125% to 10%. These new terms will be in place for 90 days.
The temporary trade truce revived hopes for smoother international trade and strengthened confidence in the economic outlook. As fears of escalating trade disruptions faded, equities, particularly in the tech and semiconductor sectors, rallied sharply.
Apart from Lam Research, this broader market optimism also boosted the share prices of other semiconductor players, including NVIDIA NVDA, Broadcom AVGO and Advanced Micro Devices AMD. Over the past month, shares of NVIDIA, Broadcom and Advanced Micro Devices have soared 24.3%, 23.4% and 19.3%, respectively.
Lam Research's long-term growth potential, along with invigorated investor optimism, makes the stock worth buying at the moment.
AI and Datacenter Demand Support LRCX's Long-Term Upside
Lam Research is well-positioned to benefit from the rising demand for artificial intelligence (AI) and datacenter chips. These chips require highly advanced fabrication processes, and LRCX provides the critical deposition and etching technologies that make this possible.
In 2024, Lam Research shipped more than $1 billion in products for next-gen chip nodes and packaging. Management expects this figure to triple by 2025. The industry's move toward technologies like backside power distribution and dry-resist processing plays directly into LRCX's strengths.
As capital investment in AI accelerates, Lam Research stands to benefit from being a key enabler of that buildout.
Strategic Investments Are Paying Off for Lam Research
Lam Research's continued investment in research & development and product innovation is paying off. Its Cryo 3.0 technology has set new performance benchmarks, giving it a competitive edge. Meanwhile, the Aether dry-resist system is gaining adoption, especially for memory applications like high-bandwidth DRAM.
Expanding its manufacturing base in Asia has also helped the company improve margins and efficiency. In the third quarter of fiscal 2025, Lam Research's non-GAAP operating margin rose to 32.8%, up 210 basis points year over year. That's impressive, considering the challenges across the broader semiconductor market.
Lam Research's Solid Financials Highlight Strength
Lam Research's latest financial results for the third quarter of fiscal 2025 confirm its ability to execute well even in uncertain times. Revenues rose 24.5% year over year to $4.72 billion, while non-GAAP EPS (adjusted for the stock split) jumped 33.5%. Strong demand from memory and logic customers, along with tight cost control, helped the company beat expectations on both the top and bottom lines.
Lam Research's consistent performance reinforces investor trust in its long-term business model and earnings stability. The stock has an impressive history of beating earnings estimates. LRCX surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 6.1%.
LRCX Stock Looks Attractive on the Valuation Front
Despite the recent rally, Lam Research stock remains reasonably priced. LRCX currently trades at a forward price-to-earnings (P/E) ratio of 21.17, which is significantly lower than the sector's 25.72. The company's discounted valuation multiple aligns with its long-term growth potential.
The stock's P/E ratio is also lower than major semiconductor players, including Advanced Micro Devices, NVIDIA and Broadcom. At present, Advanced Micro Devices, NVIDIA and Broadcom have forward 12-month P/E multiples of 24.24X, 29.73X and 32.19X, respectively.
Conclusion: Buy Lam Research Stock for Now
Lam Research's discounted valuation, solid financial performance and strategic focus on AI-driven growth make it a compelling investment option right now. The company's expanding market share in AI and datacenter fabrication, coupled with innovative product launches, strengthens its competitive positioning.
LRCX carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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