Lam Research Has Surged 300% in a Year. Wall Street Sees More Gains Still Ahead

Lam Research (NASDAQ:LRCX | LRCX Price Prediction) has been a quiet AI winner all throughout the year, with shares now up close to 300% in the past year. After a heated Wednesday session of trade that saw the semi equipment maker gain another 8%, questions linger as to whether the $371 billion titan can continue roaring higher as investors continue to digest yet another solid quarter’s earnings result.

Demand has picked up, and the climate, which might tilt the tables more heavily to the semi equipment makers, might still be in the earlier days as Lam and the rest of the pack scramble to keep up with orders.

In the right place, as the foundry expansion kicks off

Add new foundry expansion into the equation (Elon Musk’s Terafab is also getting in on the action) to help alleviate global bottlenecks facing chip production (a hard, expensive problem to tackle, but don’t count on that to deter Musk), and it seems like there might be more to Lam Research’s run, as analysts scramble to raise the bar on their price targets. Of course, the wafer fabrication equipment scene is extra cyclical and could add even more torque to a portfolio looking to profit from the great AI-driven chip supercycle.

If you’re a believer in AI’s big agentic-driven monetization cycle, which might span several years, perhaps the latest run in shares of Lam Research has legs, as the rest of the semi scene looks to march higher, even as the bears, like Dr. Michael Burry, look to take a stand against a powerful trend, the likes of which may not have been seen since the internet boom.

Here’s why the higher multiple might signify value

With Lam guiding higher after a stunning result (that’s become the new normal for the semi plays these days), I do think the hefty 56.0 times trailing price-to-earnings (P/E) multiple might not signify overvaluation, but the magnitude of the AI boom that lies ahead. As foundries look to hit the gas pedal and spend hundreds of billions, it’s the firms further down the stream (think equipment providers) that are going to be ready to collect earlier on.

Indeed, when it comes to the hyper-cyclicals like Lam Research, I do think it’s far better to pay a higher multiple than a lower multiple, given what the market is bracing for. A lower multiple would entail a fear of a peak or decelerating growth trends, while a higher multiple might be readying for a big profitability bump, one that can be quite easy to underestimate.

At 33.4 times forward P/E, Lam Research shares still don’t seem all too expensive relative to that guide and continued heat surrounding the AI trade. That said, the figure is far above the range where the stock normally trades. Either way, many Wall Street analysts seem to think there’s room to run. The price target hikes have been coming in fast after that impressive quarter that capped off a strong April surge.

Wall Street analysts aren’t turning against Lam Research stock quite yet

With Bank of America remarking on share gains while pointing to a move to $330 per share, I certainly wouldn’t bet on a peak, even if the expectations bar is getting a tad elevated. In any case, the semi equipment makers are starting to pick up traction, and I think their high multiples actually suggest great value to be had as a big growth spurt looms.