The global semiconductor manufacturing equipment and materials industry is growing by leaps and bounds, buoyed by AI-driven capital expenditure in leading-edge logic, high-bandwidth memory (“HBM”) and Test and Packaging components.
On July 14, SEMI reported in its Mid-Year Total Semiconductor Equipment Forecast – OEM Perspective that the market size of this industry is expected to reach a record high globally at $165.9 billion in 2026, up 23.2% year over year. The momentum is set to continue in the near term, reaching an estimated $229.5 billion globally in 2028.
Here, we recommend two stocks from this space for investment and long-term holding to significantly strengthen one’s portfolio. These companies are: Lam Research Corp. LRCX and Amkor Technology Inc. AMKR. Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our two picks year to date.
Image Source: Zacks Investment Research
Lam Research Corp.
Lam Research has been benefiting from accelerating semiconductor demand as AI infrastructure spending reshapes wafer fabrication requirements. LRCX entered the second half of 2026 emphasizing technology transitions across memory, logic and packaging.
Rising process complexity is increasing demand for etch and deposition tools, while NAND conversions, advanced DRAM and larger packages expand LRCX’s served market. Customer Support is scaling through upgrades, high utilization and early adoption of Equipment Intelligence and Dextro services.
Strong Earnings Results
LRCX delivered strong fourth-quarter fiscal 2026 earnings results with adjusted EPS and revenues easily beating the respective Zacks Consensus Estimate. NAND revenues more than doubled sequentially. DRAM contributed 23% of Systems revenues, with spending focused on wafer additions and upgrades across 1-alpha, 1-beta and 1-gamma nodes.
Non-GAAP gross margin reached 52%, up 210 basis points sequentially. Likewise, non-GAAP operating margin expanded 340 basis points sequentially to 38.4%. Cash, cash equivalents and restricted cash increased to $5.60 billion at the end of fourth-quarter 2026 from $4.77 billion in the previous quarter.
AI-Driven Growth
Management said AI demand is driving new capacity investments and more complex semiconductor architectures. LRCX expects calendar 2026 wafer fab equipment spending to reach the low $150 billion range, up from the prior $140 billion outlook.
AI workloads are increasing demand for HBM, chiplets and larger packages. LRCX is a leader in TSV etch and electroplating and has shipped 510-by-515-millimeter panel systems into development programs across multiple geographies. It also plans to ship its first 310-by-310-millimeter panel tool in 2026.
Lam Research is extending production-proven foundry and logic capabilities into advanced DRAM as customers adopt smaller pitches and more complex wiring. Akara has secured strategic tool-of-record positions for difficult gate etch applications, and its installed base has doubled annually since launch. VECTOR hard mask systems can improve transistor performance and yield while lowering customer costs by more than 20% versus traditional approaches.
Solid Guidance
For the first quarter of fiscal 2027, RCX projects revenues of $8.10 billion, plus or minus $400 million. The midpoint implies growth of more than 20% from the June quarter. The company expects non-GAAP gross margin of 52%, +/- 1%, and operating margin of 39.5%, +/- one point. Non-GAAP earnings are expected to be $2.15 per share, +/- $0.15.
Robust Estimate Revisions
Lam Research has an expected revenue and earnings growth rate of 45.9% and 59%, respectively, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 17.1% over the last 30 days.
LRCX has an expected revenue and earnings growth rate of 19.4% and 22.8%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 20.6% over the last 30 days.
Image Source: Zacks Investment Research
Attractive Price Upside Potential
The stock price has soared 81.9% year to date. Despite this, LRCX currently has a forward P/E of 33.71X for the current financial year, below 38.92X of the industry. The short-term average price target of brokerage firms represents an increase of 19.7% from the last closing price of $306.40. The brokerage target price is currently in the range of $260-$500. This indicates a maximum upside of 63.2% and a downside of 15.1%.
Amkor Technology Inc.
Amkor has been benefiting from accelerating AI and HPC packaging demand. Computing revenue was reported at a record level in the second quarter of 2026, up approximately 26% year over year, and is expected to grow nearly 30% sequentially in the third quarter of 2026 as the newest HDFO data center CPU program continues to ramp.
AMKR’s Advanced products were reported at $1.557 billion, up 26.79% year over year, reflecting a sustained mix shift toward higher value offerings. Automotive and Industrial revenue also reached a record level, supported by ADAS demand and increasing semiconductor content in next-generation vehicle platforms.
Strong Earnings Results
Amkor delivered strong second-quarter 2026 earnings results with adjusted EPS and revenues easily beating the respective Zacks Consensus Estimate. AMKR's second-quarter 2026 revenue mix continued to skew toward higher value work.
Profitability improved sharply from the year-ago period. Adjusted gross margin expanded to 16.8%, up roughly 480 basis points year over year. Operating margin was 10.5%, up roughly 440 basis points year over year, reflecting higher factory utilization and a richer product mix.
AI-Fueled Growth
Management pointed to accelerating Computing growth of nearly 30% sequentially in the third quarter, driven by AI-powered data center demand and the continued ramp of the HDFO CPU program, partly offset by a high single-digit sequential decline in Communications tied to the planned SiP transition from Korea to Vietnam and the ongoing memory supply constraints.
Recently announced 10-year strategic partnerships with Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and a multi-year agreement with NVIDIA Corp. (NVDA) are reinforcing the company's long-term advanced packaging growth trajectory.
Solid Guidance
For the third quarter of 2026, AMKR expects net sales of $1.95-$2.05 billion and a gross margin of 18.5-19.5%. Net income is expected to be $180-$205 million, with EPS between $0.72-$0.82.
Full-year 2026 capital expenditures remain projected at approximately $2.5-$3 billion, with roughly 65% to 70% allocated to facilities expansion, including Phase 1 of the Arizona campus and 30% to 35% allocated to HDFO, test and other advanced packaging capacity.
Robust Estimate Revisions
Amkor has an expected revenue and earnings growth rate of 14% and 74.7%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 26% over the last 30 days.
AMKR has an expected revenue and earnings growth rate of 11.8% and 4.2%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 26.4% over the last 30 days.
Image Source: Zacks Investment Research
Huge Price Upside Potential
The stock price has surged 40% year to date. Despite this, AMKR currently has a forward P/E of 21.12X for the current financial year, well below the industry average of 38.92X. The short-term average price target of brokerage firms represents an increase of 41.9% from the last closing price of $52.87. The brokerage target price is currently in the range of $60-90. This indicates a maximum upside of 70.2% and no downside.
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