Key Takeaways
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Micron has been getting a lot of attention lately, but it’s important to note that other companies are also reaping the benefits from the memory industry surge.
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Lam Research’s stock has seen impressive growth, more than doubling in 2025, and it continues to have a solid valuation.
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As memory manufacturers increase production, Lam Research might experience further gains.
The memory market has shown remarkable performance over the last few years. According to Yoru Group, industry revenues are projected to soar by 78% to $170 billion in 2024, with an additional double-digit growth expected to push it to $200 billion in 2025.
Looking ahead, the memory sector seems set for continued strong expansion into 2026. The rising demand for AI server chips is causing supply shortages in the memory space, pushing prices up dramatically.
Companies like Micron Technology (NASDAQ:MU) are seeing substantial increases in their revenues and profits. In its latest quarter, Micron reported a 57% year-over-year revenue increase, hitting $13.6 billion, while adjusted profits surged nearly threefold. The growth is largely fueled by favorable supply and demand conditions.
Micron’s valuation positions it as an attractive option for those looking to capitalize on the expected growth in the memory market for 2026 and beyond. Yet, it’s worth also considering another key player in the memory industry: Lam Research (NASDAQ:LRCX).
The Growing Demand for AI Chips
The incredible demand for high-bandwidth memory (HBM) chips is creating backorders that manufacturers are struggling to fulfill. This isn’t too surprising, as projections indicate that bit shipments in the dynamic random access memory (DRAM) sector could grow by around 20% in 2025, as stated by Micron’s CEO, Sanjay Mehrotra. He anticipates a similar growth rate for the upcoming year, but it might not be a significant leap.
However, Micron has raised its earnings forecast for HBM significantly. The company now expects revenues from HBM to hit $100 billion by 2028, a substantial increase from an earlier projection of $35 billion in 2025. Initially, the HBM sector was expected to reach that $100 billion mark by 2030, now projected to grow at an annual rate of approximately 42% instead of the previously estimated 23%.
Notably, the anticipated growth in HBM is outpacing the expected rise in memory bit shipments. While this may escalate prices, it also suggests that companies like Micron won’t be able to satisfy all future demand. Consequently, Micron and similar companies are upping their capital expenditures to enhance production capacity.
For instance, Micron is increasing its capital investment budget for FY2026 to $20 billion, a 45% rise from the previous year, in response to the burgeoning demand for HBM. Samsung, too, is reportedly set to boost HBM capacity by 50% in 2026. Meanwhile, SK Hynix is expected to begin HBM production four months ahead of schedule and plans to ramp up capacity significantly.
Impressive Stock Performance from Lam Research
Lam Research has impressively enriched its investors in 2025, with stock prices climbing 143%. Even with this surge, the stock remains relatively affordable, trading at 11.5 times sales and 36 times forward earnings. This upward trend doesn’t seem to be waning, indicating that investing in this stock could still be a wise decision.
In the most recent quarter, sales were up 28% year-over-year to $5.32 billion, with profits increasing by 44%. According to CEO Tim Archer, this growth can be attributed to better-than-expected investments in HBM. A notable portion of Lam’s revenue—34%—comes from memory device sales.
The CEO remains optimistic that spending on memory and semiconductor equipment will stay robust through 2026, spurred on by AI-related demand. This optimism is underscored by Micron, Samsung, and SK Hynix’s increased HBM production. Lam Research estimates that for every $100 billion invested in data centers, an additional $8 billion will be allocated for wafer fabrication equipment (WFE). Moreover, there’s potential to expand its market significantly by converting existing facilities to handle more advanced storage chip production.
Lam Research anticipates that its revenue this fiscal year will reach $21.3 billion, marking a 15% increase from the previous year, with steady growth expected in the future. However, considering its broad range of market opportunities, it’s possible that they may surpass these forecasts. Given its strong performance and continued growth prospects, Lam Research appears well-positioned to benefit from the rising trend in memory device spending and semiconductor investments to support the growth of AI.
Is Now the Time to Buy Lam Research Stock?
Before jumping into a purchase of Lam Research stock, here are some thoughts to consider:
While our analysts have identified several stocks they believe offer more immediate potential for impressive returns than Lam Research, it’s essential to keep in mind that different investments suit different strategies and risk tolerances.
Given the anticipated market environment, Lam could still outperform expectations moving forward, especially with its track record of beating analyst predictions recently. The bullish trend for Lam Research’s stock price might persist as demand for memory devices and semiconductor technologies grows.
