The robust spending by memory manufacturers to satisfy demand driven by AI is likely to benefit the company.
Recently, the memory sector has seen significant growth. According to estimates from Yoru Group, industry revenue is projected to surge by 78% to $170 billion in 2024, followed by another solid increase to $200 billion in 2025.
The outlook for 2026 appears equally promising. The soaring need for high-bandwidth memory (HBM) used in AI server chips has led to a supply crunch within the memory market, pushing prices upwards.
Unsurprisingly, companies like Micron Technology have reported impressive revenue and profit increases. Micron’s revenue climbed 57% year-over-year to $13.6 billion in its latest quarter, with adjusted earnings nearly tripling. The company anticipates a significant acceleration in growth this quarter due to favorable supply and demand dynamics.
Micron’s attractive valuation positions it well for capitalizing on the memory market’s expansion in 2026 and beyond. However, let’s also consider another key player in the memory sector: Lam Research.
Micron and competitors are boosting capital investments to address the memory chip shortage
The demand for HBM chips tailored for AI is so robust that manufacturers struggle to fulfill orders. This aligns with projections that bit shipments in the dynamic random access memory (DRAM) industry will grow in the low 20% range in 2025, as noted by Micron’s CEO, Sanjay Mehrotra. He expects a similar 20% increase for the coming year, which might not seem like a huge leap.
Nevertheless, Micron has significantly raised its revenue forecast for HBM. It now expects revenue from these chips to hit $100 billion by 2028, a notable increase from the previous estimate of $35 billion in 2025. Earlier, the industry was thought to reach the $100 billion mark by 2030, but Micron’s revised forecast suggests a growth rate of around 42% annually, much higher than the prior estimate of 23%.
Moreover, the anticipated growth in HBM far outpaces the expected rise in memory bit shipments. While this could lead to higher prices, it also means that companies like Micron won’t be able to satisfy all future demand. As a reaction, Micron and its peers are ramping up capital expenditures to boost production capacity.
For instance, Micron has increased its fiscal 2026 capital expenditure budget to $20 billion from an earlier $18 billion projection, reflecting a 45% hike compared to fiscal year 2025. Samsung is reportedly looking to enhance HBM production capacity by 50% in 2026.
Similarly, SK Hynix plans to start producing HBM at one of its facilities four months ahead of schedule, with plans to expand this facility’s capacity significantly by the end of 2026. This situation bodes well for companies like Lam Research, which generates a substantial portion of their revenue from selling memory manufacturing equipment.
Lam Research’s stock appears set for continued growth following impressive performance in 2025
In 2025, Lam Research significantly increased investors’ wealth, with its stock price skyrocketing by 143%. Even with this increase, the stock remains attractively priced at 11.5 times sales and 36 times forward earnings. Considering the ongoing momentum, investing in this memory stock seems wise.
In the last quarter, concluded on September 28, sales rose by 28% year-over-year to $5.32 billion, with profits climbing 44%. According to CEO Tim Archer, this growth results from “better-than-expected high-bandwidth memory and HBM investments.” Notably, Lam derives 34% of its income from memory device sales.
The CEO believes that spending related to memory and other semiconductor equipment will remain robust in 2026, primarily due to AI-driven demand. This perspective seems justified given the initiatives by Micron, Samsung, and SK Hynix to boost HBM production. The demand for AI data centers, requiring HBM, high-speed storage, and advanced processing chips, is also rising, leading to a potential expansion of their total addressable market (TAM).
Lam estimates that for every $100 billion invested in data centers, an additional $8 billion will be necessary for wafer fabrication equipment (WFE) spending. Furthermore, transitioning existing manufacturing plants to produce more advanced storage chips could effectively expand its addressable market by $40 billion in the upcoming years.
This fiscal year, Lam Research’s revenue is expected to be around $21.3 billion, reflecting a 15% increase compared to last year. Analysts forecast steady growth for the coming years.
However, considering the wide range of addressable opportunities mentioned earlier, it wouldn’t be surprising if Lam surpassed these expectations. The company exceeded Wall Street forecasts in 2026, and its stock price may continue to rise in the long term. This positioning makes Lam Research one of the top AI stocks to consider now, set to benefit from increased spending on memory devices and overall semiconductor investments to support AI integration.
