Is It Too Late To Consider Lam Research After Its 127% AI Fueled Surge In 2025?

• If you are wondering whether Lam Research is still worth buying after its huge run, you are not alone. This breakdown will help you cut through the noise.
• The stock has climbed 2.6% over the last week, 10.7% over the past month, and is up an eye catching 127.4% year to date. It has recorded a staggering 131.5% gain over 1 year and 312.4% over 3 years, which hints at strong momentum but also rising expectations.
• Recently, Lam has stayed in the spotlight as investors double down on chip equipment names tied to AI infrastructure and advanced memory production, helping to fuel those share price moves. Industry wide optimism around long term semiconductor demand and the capital spending cycle has further reinforced the narrative that key equipment suppliers like Lam could be structural winners.
• Despite the excitement, Lam Research only scores a 2/6 valuation check score, suggesting that not every metric is flashing cheap. We will unpack what different valuation methods say about the stock and finish by exploring a more complete way to think about its true worth.

Lam Research scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Lam Research Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting its future cash flows and then discounting those cash flows back into present dollar terms. For Lam Research, the model uses a 2 Stage Free Cash Flow to Equity approach.

Lam currently generates about $5.73 billion in free cash flow. Analyst forecasts plus extrapolations by Simply Wall St see this rising to around $7.84 billion by 2030, with a series of growing cash flows in the years in between. All of these projected cash flows are in $ and are discounted back to today to account for risk and the time value of money.

On this basis, the model arrives at an estimated intrinsic value of roughly $66.65 per share. Compared with the current market price, this implies the stock is about 147.1% above its DCF based fair value, suggesting investors are paying a heavy premium for Lam’s future growth and AI related tailwinds.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Lam Research may be overvalued by 147.1%. Discover 917 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Lam Research.

Approach 2: Lam Research Price vs Earnings

For a profitable, established business like Lam Research, the price to earnings (PE) ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher uncertainty should translate into a lower, more conservative multiple.

Lam currently trades on a PE of about 35.6x. That is slightly below the peer group average of around 38.6x and close to the broader Semiconductor industry average of roughly 36.1x, suggesting the market is valuing Lam broadly in line with other major chip equipment names. However, Simply Wall St also calculates a proprietary “Fair Ratio” for each company, which for Lam comes out at 31.3x.

The Fair Ratio is designed to be a more precise yardstick than a simple peer or industry comparison, as it incorporates Lam’s specific earnings growth outlook, profitability, risk profile, industry characteristics and market cap. Comparing Lam’s current 35.6x PE with its 31.3x Fair Ratio points to investors paying a premium to what these fundamentals alone would justify, indicating the stock looks overvalued on this basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1462 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Lam Research Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple framework on Simply Wall St’s Community page that lets you tell the story behind Lam Research’s numbers by connecting your view of its AI driven chip demand, margins, and risks to a concrete forecast and fair value. It then automatically compares that fair value to today’s share price to flag potential buy or sell opportunities, updating in real time as new earnings or news arrives. It also reveals how bullish investors might justify a higher fair value around $135 based on stronger AI memory and WFE upside, while more cautious investors anchor closer to $80 with greater weight on geopolitical and cycle risks. All of this is available within an accessible tool used by millions of investors to see, test, and refine their own Lam Research narrative instead of relying only on static PE ratios.

Do you think there's more to the story for Lam Research? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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