Lam Research Plummets 3.5%—What's Driving the Semiconductor Equipment Leader Lower?

• LRCX slumps to $97.47, down 3.56% intraday, trading near its 52W low of $56.32
• Institutional buying surges: Wealthfront Advisers LLC boosts holdings by 6.7%
• Sector peers struggle: Applied Materials (AMAT) down 4.3% amid supply chain concerns
• RSI hits 72.4 (overbought), yet Bollinger Bands signal near-term support at $90.23

Lam Research’s steep drop on July 16 highlights sector-wide volatility as geopolitical tensions and supply chain bottlenecks reshape the semiconductor landscape. Despite strong institutional inflows and a robust Q2 for peers like ASML, LRCX’s price action reflects broader fears about demand sustainability in advanced node manufacturing.

Sector-Wide Uncertainty Overshadows Strong Fundamentals
LRCX’s decline isn’t rooted in company-specific negatives. The stock’s 3.5% drop mirrors broader semiconductor equipment sector weakness, driven by fears of a bifurcating supply chain. The July 15 drop in trading volume (-27.97%) and ASML’s cautious 2026 outlook—highlighting geopolitical risks and material shortages—suggest investors are pricing in structural headwinds. While LRCX reported solid Q4 results with $4.72B revenue and beat EPS estimates, the market now prioritizes macro risks over individual performance. The stock’s retreat below its 200-day MA ($101.19) signals traders are bracing for potential overcapacity or demand delays in 3nm/2nm node adoption.

Semiconductor Equipment Sector Slumps Amid Supply Chain Fears
LRCX’s decline aligns with sector peers like Applied Materials (AMAT, -4.3%) and ASML (not in data), as geopolitical fragmentation and material shortages create uncertainty. While AMAT’s undervaluation (16.3x EV/EBITDA vs. LRCX’s 25.7x) offers relative value, LRCX’s dominance in etch systems keeps it a key barometer for advanced node demand. However, the sector’s 2026 supply chain risks—exacerbated by U.S.-China trade tensions—mean even leaders like LRCX face execution hurdles to maintain margins.

Bullish Puts and Bearish Calls: Navigating LRCX’s Technical Crossroads
Technical Indicators:
• 200-day MA: $101.19 (current price below, bearish)
• RSI: 72.4 (overbought, signaling potential pullback)
• Bollinger Bands: Current price near lower band ($90.23) suggests short-term support.

Top Option Picks:
1. LRCX20250725P93 (Put)
- Strike: $93 | Expiration: 2025-07-25
- Delta: -0.1859 | Theta: -0.0089 | Gamma: 0.0467
- Leverage Ratio: 162.90% | IV: 35.47%
- Why: High gamma (sensitivity to price swings) and theta decay favor this put if LRCX breaks below $93. Potential payoff in a 5% downside scenario: $93 - (97.47(1-0.05)) = $1.73 per contract.

2. LRCX20250725C97 (Call)
- Strike: $97 | Expiration: 2025-07-25
- Delta: 0.5739 | Theta: -0.2928 | Gamma: 0.0746
- Leverage Ratio: 38.63% | IV: 32.47%
- Why*: Moderate delta and high gamma make this call a tactical bet on a rebound to $100+. Payoff at $100: max(0, $100 - $97) = $3 per contract.

Trading Hook: Aggressive bears target LRCX20250725P93 below $93; bulls test LRCX20250725C97 into $98 resistance. Avoid long calls above $100 until RSI normalizes.

Backtest Lam Research Stock Performance
The backtest of LRCX's performance after an intraday plunge of -4% shows favorable short-to-medium-term gains. The 3-Day win rate is 53.29%, the 10-Day win rate is 50.99%, and the 30-Day win rate is 54.28%. Although the maximum return during the backtest period is only 0.34% at day 59, the overall trend suggests that LRCX tends to recover modestly following a significant intraday decline.

Hold the Line or Hedge—LRCX’s Next Move Depends on Supply Chain Clarity
Lam Research’s 3.5% drop underscores the precarious balancing act facing semiconductor equipment leaders. While institutional demand and LRCX’s etch system dominance provide a floor, the stock’s technical breakdown below $101 and sector-wide supply chain risks suggest caution. Investors should monitor the $90.23 Bollinger Band support and AMAT’s -4.3% price action as proxies for sector sentiment. Action Insight: Fade rallies above $100 until geopolitical clarity emerges—LRCX20250725P93 offers asymmetric protection while bulls wait for a sustainable rebound past the 50-day MA ($93.76).