Lam Research (LRCX): Why Jim Cramer Calls This Semiconductor Leader a "Gem"

Jim Cramer’s endorsement of Lam Research Corporation (LRCX) is unequivocal: “That stock is so cheap; I want to buy it.” The Mad Money host has repeatedly highlighted LRCX as a hidden gem in the semiconductor sector, blending value investing with exposure to the AI revolution. Here’s why investors should take notice.

The Case for LRCX: Valuation and Catalysts

Cramer’s bullish stance hinges on Lam Research’s undervalued price and upcoming catalysts. As of early 2025, LRCX trades at a forward price-to-earnings (P/E) multiple of 22, well below the semiconductor industry average of 35. This discount is stark for a company generating record profits: in Q1 2025, revenue hit $4.72 billion, an 8% sequential rise, while non-GAAP EPS surged to $1.04, beating estimates.

The company’s Q2 2025 guidance is equally promising, with revenue expected to reach $5.0 billion and EPS projected at $1.20, fueled by AI-driven demand for advanced chips. Lam’s systems business—critical for manufacturing leading-edge semiconductors—grew 15% sequentially in Q1, outpacing services revenue declines in mature-node markets.

Why the Semiconductor Sector Still Matters

Lam Research is a pillar of the $500 billion semiconductor equipment market, specializing in deposition and etch tools essential for AI chips, 3D NAND, and foundry logic. Cramer argues that the sector is entering a “golden era” as AI infrastructure spending soars.

• AI’s Role: Lam’s tools are indispensable for producing chips used in AI applications like generative models and autonomous systems. Foundry logic and advanced packaging—both key to AI—contributed record revenues in Q1.
• China Risks Mitigated: While U.S. export controls threaten $700 million in annual revenue from China, Lam has diversified into Taiwan, Korea, and Japan. China’s share of revenue fell to 31% in Q1, down from previous highs.

Contrasting LRCX with AI Stocks: Value vs. Growth

Cramer acknowledges that AI stocks (e.g., NVIDIA, AMD) offer higher growth but cautions about volatility. LRCX, by contrast, provides stability and income with a 1.15% dividend yield and a strong balance sheet ($5.5 billion in cash).

Hedge Fund Support and Technicals

Lam Research’s appeal extends to institutional investors: 84 hedge funds held the stock as of Q4 2024, a sign of confidence. Technical traders may watch for support at $67–$71, with Cramer noting that dips below $57 could present rare buying opportunities.

Risks and Considerations

• Geopolitical Headwinds: U.S.-China tensions could further limit Lam’s China operations, though CEO Tim Archer emphasizes “agile manufacturing” to mitigate risks.
• Sector Cyclicality: Semiconductor demand remains tied to broader tech spending, which could weaken if AI adoption slows.

Conclusion: A Buy for Value and Long-Term Growth

Lam Research is a rare blend of value and growth, riding the AI wave while trading at a discount to peers. With Q2 earnings poised to hit $5.0 billion, a dividend yield of 1.15%, and institutional backing, LRCX offers asymmetric upside.

Cramer’s call to “buy the dips” holds merit: even if near-term macro risks weigh on semiconductors, Lam’s $10.7 billion average analyst price target (a 35% upside from May 2025 prices) underscores its long-term potential. For investors seeking stability in a volatile market, LRCX is indeed a gem.