Lam Research Corporation LRCX shares have plunged 15.6% over the past month, underperforming the Zacks Computer and Technology sector’s 4.4% decline. At first glance, such a sharp decline may worry investors. However, Lam Research is not the only semiconductor equipment company experiencing selling pressure.
The entire wafer fabrication equipment space has been under pressure. Peers such as ASML Holding ASML, Applied Materials AMAT and KLA Corporation KLAC have also struggled during the same period. Shares of ASML Holding, Applied Materials and KLA Corporation have tanked 10%, 12.7% and 21.6%, respectively. This broad weakness suggests that investors are trimming exposure to semiconductor stocks across the board rather than losing confidence in Lam Research specifically.
Lam Research One-Month Price Return Performance
Image Source: Zacks Investment Research
The recent weakness stems from two key concerns. First, investors have started questioning whether hyperscalers' massive AI investments will generate enough returns to justify the spending. Second, semiconductor stocks enjoyed a strong rally earlier in 2026, pushing valuations higher and encouraging investors to lock in profits.
Even so, Lam Research's long-term story has not changed. The recent decline looks more like a sentiment-driven correction than a deterioration in the company's business. That makes the stock worth buying at current levels.
AI Chip Demand Continues to Power Lam Research's Growth
Lam Research plays a critical role in the AI semiconductor supply chain. Rather than designing chips, it provides the advanced manufacturing equipment used by foundries such as Taiwan Semiconductor Manufacturing and Samsung to produce leading-edge semiconductors.
This gives Lam Research direct exposure to one of the strongest technology trends today. As AI chips become more advanced, demand for technologies such as advanced packaging, high-bandwidth memory (HBM) and next-generation chip architectures continues to rise. All of these require sophisticated etch and deposition equipment, where Lam Research has built a strong competitive position.
The company is also expanding its technology leadership. Its ALTUS ALD system improves manufacturing efficiency through molybdenum-based deposition, while its Aether platform enables customers to build smaller, denser and more powerful chips. As semiconductor complexity increases, these innovations should become even more valuable.
Management expects advanced packaging revenues to grow more than 70% in 2026 after posting strong growth in 2025. Emerging technologies like backside power distribution and dry-resist processing are also expected to create new growth opportunities over the coming years.
The demand trends are already showing up in the numbers. Lam Research has generated more than $5 billion in revenues for five straight quarters, including a record $6.72 billion in the fourth quarter of fiscal 2026. This reflects healthy spending by the world's leading chip manufacturers despite broader market concerns.
LRCX’s Strong Financial Results Reinforce the Bull Thesis
Lam Research is not just benefiting from AI demand, it is performing exceptionally well.
In the fourth quarter of fiscal 2026, revenues increased 30% year over year to $6.72 billion, beating the Zacks Consensus Estimate by 0.7%. Growth was driven by strong performance across both its Systems business and Customer Support Business Group. Non-GAAP earnings climbed 37% year over year to $1.82 per share, surpassing estimates by 7.7%.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
Lam Research also delivered stronger profitability despite geopolitical uncertainty, tariffs and a challenging macro environment. Non-GAAP gross margin expanded 170 basis points year over year to 35%, supported by better pricing, operating efficiencies, scale benefits and a favorable product mix. Meanwhile, non-GAAP operating margin improved 400 basis points to 38.4%, aided by higher gross margins, a broader manufacturing footprint across Asia and disciplined cost management.
These results reinforce the view that Lam Research's growth is not solely dependent on short-term AI enthusiasm. The company continues to improve its operations while delivering strong revenue and earnings growth.
Wall Street also expects the momentum to continue. The Zacks Consensus Estimate projects fiscal 2027 and 2028 revenues to increase 25.4% and 31.1%, respectively. Earnings per share are expected to grow 53% in fiscal 2027 and another 29% in fiscal 2028, highlighting the company's attractive long-term earnings potential.
Strong AI Tailwinds Support Lam Research's Higher Multiple
From a valuation perspective, Lam Research does not look cheap. The stock carries a Zacks Value Score of F, indicating a premium valuation.
Based on forward 12-month earnings, LRCX trades at 32.04X, well above the sector average of 20.74X. While that premium may appear expensive at first, it reflects the company's strong earnings outlook, AI-driven growth opportunities and consistent execution.
Lam Research Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Among its closest peers, Lam Research trades at a higher multiple than ASML Holding but remains cheaper than both KLA Corporation and Applied Materials. ASML, KLA and Applied Materials currently trade at forward 12-month P/E multiples of 30.94X, 33.08X and 34.02X, respectively. This suggests Lam Research's valuation remains reasonable when viewed against its direct competitors.
Investment Verdict: Buy Lam Research Shares
The recent sell-off appears to be driven more by market sentiment than by any weakness in Lam Research's business. The company remains one of the biggest beneficiaries of the ongoing AI infrastructure buildout, while its leadership in etch and deposition equipment gives it a durable competitive edge.
The demand for advanced packaging continues to accelerate, and the company is introducing new manufacturing technologies to tap the opportunity. Its financial performance remains strong. Combined with healthy earnings growth and solid execution, these factors strengthen the long-term investment case.
Currently, Lam Research sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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