Is Lam Research Corporation (LRCX) Worth Buying on the China H20 Chip Sale Ban?
Semiconductor manufacturers are at the forefront of the technological battle, especially in the context of China's rapid tech developments. One would have thought President Trump would take it easy on the chipmakers owing to their critical position in the US and global tech infrastructure.
However, investors are now finding out that semi stocks aren't immune to tariffs, with the latest round of tariffs expected to cost manufacturers around $1 billion. This cost will be incurred through lost sales, increased regulatory compliance, and elevated supply chain costs.
Uncertainty regarding the exact details of the tariffs continues to cause chaos in the market. Chip stocks are sliding as the leading chipmaker, led by Jensen Huang, finds its H20 chips banned from export to China. As the leading chipmaker tries to steer its way out of the crisis, other companies that rely on this giant for business are also trying to figure out what to do.
We decided to take a look at such stocks and see if they offer value. Remember that the H20 chips were made specifically for China, and a ban on selling them is only a temporary headwind, not something that threatens the company's moat.
To come up with the list of semiconductor stocks worth buying on the China H20 chip sale ban, we considered stocks that are an integral part of the semiconductor supply chain and ranked them by hedge fund interest in their stocks.
A technician operating an automated semiconductor processing machine with laser accuracy.
Number of Hedge Fund Holders: 84
Lam Research Corporation is a manufacturer, refurbisher, service provider, designer, and marketer of semiconductor processing equipment. It provides SABRE electrochemical deposition products, ALTUS systems, and VECTOR plasma-enhanced CVD products.
Analysts at Susquehanna recently upgraded the company from Neutral to Buy with an increased price target of $125 from $75. This upgrade was a result of the introduction of new products and a fresh strategy to expand the firm's market presence.
Oppenheimer also started coverage of the company last month. The financial services firm assigned an Outperform rating to the company with a target price of $95.
Oppenheimer analysts Edward Yang and Kevin Lee highlighted the company's growth potential by saying:
'LRCX is currently down ~30%, which we think creates a nice buying opportunity if no recession, as it's outperformed the S&P 500 in 7 of the last 10 years, 35% over 5 years, and 240% over 10 years, Lam's hard-to-replicate technology, strong mgmt., and capital stewardship support long-term value.'
According to the 33 different analyst ratings, the company has a highest target price of $125, which means it has a potential upside of 75% from the current levels if the bull scenario proves accurate. Investors, however, may want to wait a little to see how the tariffs-induced dip plays out before taking a position in the stock.
Overall, LRCX ranks 5th on our list of semiconductor stocks tumbling on China H20 chip sale ban. While we acknowledge the potential of LRCX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than LRCX but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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