Lam Research (LRCX): Evaluating Valuation After Record Margins and Strong AI Semiconductor Demand Propel Latest Earnings Beat

Lam Research (LRCX) just posted quarterly results that topped Wall Street estimates, reporting record gross and operating margins. The company’s earnings growth has been driven by elevated demand for AI-focused semiconductor equipment.

See our latest analysis for Lam Research.

The momentum behind Lam Research’s stock has been remarkable, with a year-to-date share price return of 116.6% and a total shareholder return above 110% over the last twelve months, thanks to record-setting margins and rapid demand for AI-chip equipment. Strong quarterly results, upbeat forward guidance, and an active share buyback program have all contributed to renewed optimism, even as peers have flagged some sector caution, suggesting that growth potential is still very much in play for the longer term.

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After such a strong run-up and a series of record results, are investors looking at a rare chance to buy into Lam Research before its next leg higher, or is the market already pricing in every bit of future growth?

Most Popular Narrative: 19.8% Overvalued

Despite Lam Research’s higher fair value estimate of $130.96, shares most recently closed at $156.90, placing the stock well above this consensus assessment. As valuations stretch, all eyes are on whether bullish expectations can keep pace with price momentum.

Rapidly rising AI workloads and the associated need for higher storage, bandwidth, and processing power are accelerating the adoption of advanced chip architectures (such as gate-all-around, 3D NAND, and advanced packaging). This increases demand for Lam's etch and deposition tools, supporting sustained revenue growth and robust order visibility. Expanding government incentives and a global push for semiconductor self-sufficiency (for example, US and EU CHIPS Acts) are spurring new fab construction and regional equipment investments. This directly contributes to higher system sales and broadens Lam's customer base, reducing revenue cyclicality and regional risk.

Read the complete narrative.

Want to see the projections fueling that premium price target? The narrative leans on ambitions for durable growth, margin expansion, and market transformation driven by skyrocketing AI hardware demand. Find out what makes this forecast stand out.

Result: Fair Value of $130.96 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent geopolitical tensions or sudden slowdowns in memory spending could quickly undermine Lam’s growth thesis and its valuation premium.

Find out about the key risks to this Lam Research narrative.

Another View: Multiples Comparison Paints a Different Picture

While one method suggests Lam Research is overvalued, its price-to-earnings ratio of 33.9x comes in lower than the U.S. Semiconductor industry average of 40.3x and peers' 41.2x. This means Lam actually trades at a relative discount versus rivals. However, with a fair ratio of 32.9x, it is only slightly above where the market could eventually settle. Does this relative value tip the scale, or is the margin of safety still too thin?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Lam Research Narrative

If you would rather dig into the data yourself or have your own take on Lam Research’s outlook, you can craft a personalized view in just a few minutes with Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Lam Research.

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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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