LRCX: Recent AI And Memory Upcycle Euphoria Will Likely Fade

Analysts have raised their price target on Lam Research to approximately $110 from about $81, citing the company's stronger than expected earnings momentum, improving wafer fab equipment upcycle exposure, and durable AI driven demand for advanced memory and 3D stacking technologies.

Analyst Commentary

Recent Street research reflects a broadly constructive view on Lam Research, with multiple firms lifting price targets and highlighting the company’s leverage to an improving wafer fab equipment cycle, AI driven memory demand, and stronger than expected profitability. Price targets have generally moved higher following a series of earnings beats, improved visibility into advanced node spending, and signs of a cyclical recovery in DRAM and foundry investments.

More bullish voices have pointed to Lam’s leading position in 3D stacking and memory as a key enabler of AI scaling, noting that recent quarters delivered record profitability and guidance that exceeded consensus on both revenue and earnings. Several large houses have raised their targets into the $160 to $200 range, citing upside from China spending, continued positive earnings revisions, and a favorable long term correlation between AI data center capex and wafer fab equipment demand.

At the same time, some commentary has urged investors to temper expectations for the outer years. While discussions at recent industry conferences underscored improving DRAM fab investment and progress in AI computing, there is a view that expectations for 2026 WFE may already embed a robust upcycle, leaving less room for further estimate expansion if the macro or capex environment softens.

These mixed but generally positive signals underscore a consensus that Lam is well positioned structurally, but that the pace of share appreciation and the timing of tool demand recovery will be crucial in determining whether the stock can sustain or extend its re-rating.

Bearish Takeaways

• Bearish analysts argue that the recent share rally has outpaced near term earnings power, with valuation now embedding a strong memory and AI capex recovery that may take longer to materialize.
• Some see a risk that improving memory pricing does not immediately translate into new tool orders, creating a potential execution gap between investor expectations and actual WFE spending trends.
• There are concerns that 2026 WFE forecasts already assume a robust upcycle, which could heighten downside risk to growth estimates if macro conditions or customer capex plans disappoint.
• Cautious views also highlight relative opportunity cost, suggesting that investors seeking memory exposure might find more attractive risk reward profiles in alternative semi cap names if Lam’s growth normalizes from its recent beat and raise pattern.

What's in the News

• Opened a new $65 million, four story, 120,000 square foot R&D office in Tualatin, Oregon, adding capacity for up to 700 employees as part of a multi year U.S. expansion strategy aligned with long term AI driven semiconductor growth (Key Developments).
• Share repurchase program progressed with 9,686,000 shares bought back between June 30 and September 28, 2025, completing a total of 40,414,786 shares repurchased for $3.39 billion under the May 21, 2024 authorization (Key Developments).
• Provided earnings guidance for the quarter ending December 28, 2025, projecting US GAAP revenue of $5.20 billion plus or minus $300 million, operating margin around 32.9 percent, and net income per diluted share of $1.15 plus or minus $0.10 (Key Developments).
• Recorded $5.29 million in impairment of long lived assets for the three months ended September 28, 2025, reflecting adjustments to certain asset values on the balance sheet (Key Developments).
• Stockholders approved an amendment to the Restated Certificate of Incorporation at the November 4, 2025 annual meeting, following an earlier proposal to limit the liability of certain officers as permitted by Delaware law (Key Developments).

Valuation Changes

• The fair value estimate has risen meaningfully, from approximately $81.24 to about $110.13 per share, reflecting a stronger outlook for earnings and cash flows.
• The discount rate has increased slightly, from about 10.11 percent to roughly 10.54 percent, implying a modestly higher required return for Lam Research’s equity.
• The revenue growth assumption has been raised significantly, from roughly 5.05 percent to about 7.37 percent, indicating higher expected top line expansion over the forecast horizon.
• The net profit margin has edged down slightly, from about 26.71 percent to approximately 26.39 percent, suggesting a modestly more conservative view on long term profitability.
• The future P/E multiple has increased notably, from around 22.9x to roughly 27.3x, indicating a higher valuation being assigned to Lam Research’s anticipated earnings stream.