Lam Research Stock Surges on Strong PC and Smartphone Sales Outlook

Lam Research Corporation (LRCX) shares rose 1.55% to $89.02 on Thursday, February 21, 2025, as investors reacted to positive news regarding the company's growth prospects in the PC and smartphone markets. The stock's performance was driven by several factors that align with Lam Research's long-term strategic goals and market trends.

1. Growth in PC and smartphone sales: The company's stock rose on expectations of increased demand for chips in the PC and smartphone markets. According to the provided information, PC sales are expected to grow by over 4% to about 273 million units in 2025, while smartphone sales are projected to grow at low single digits to reach an estimated 1.24 billion units. This growth in end markets is crucial for the semiconductor industry, as communication and computer chip sales made up 57% of overall semiconductor sales in 2023. Lam Research, as a supplier of wafer fabrication equipment, stands to benefit from this increased demand for chips.
2. Investment in research and development (R&D): Lam Research has been investing heavily in R&D, with spending growing at a 12% CAGR, while earnings before interest and taxes (EBIT) are only growing at 10%. This focus on R&D aligns with the company's long-term strategic goal of maintaining technology leadership and extending product differentiation. The company's commitment to R&D is evident in its development of innovative technologies like Aether®, an EUV dry photoresist technology, which has been adopted by a leading memory manufacturer.
3. Expansion into new markets and technologies: Lam Research is also expanding into new markets and technologies, such as generative AI accelerator chips for PCs, smartphones, the enterprise edge, and the Internet of Things (IoT). This expansion aligns with the company's strategic goal of diversifying its revenue streams and capitalizing on emerging trends in the semiconductor industry. The company's qualification of its dry photoresist technology for direct-print 28nm pitch back end of line (BEOL) logic at a leading foundry is an example of its success in this area.
4. Resilient supply chains: Lam Research's global presence and diverse customer base contribute to its resilience and growth potential in a dynamic market environment. The company's geographic diversification, with revenue generated from various regions such as China (40%), Korea (19%), Japan (14%), Taiwan (13%), the United States (5%), Europe (5%), and Southeast Asia (4%) during the December 2023 quarter, helps mitigate risks associated with relying too heavily on a single region or market. Additionally, the company's diverse product portfolio, including deposition, etch, and clean equipment, as well as customer service, spares, upgrades, and non-leading-edge equipment from its Reliant® product line, enables it to address various market segments and customer needs.