Can Lam Research's Systems Business Sustain Growth Amid AI Capex Boom?

Lam Research Corporation LRCX is seeing strong demand for its Systems business, driven by rising investments in artificial intelligence (AI) infrastructure. Chipmakers are increasing spending on advanced tools to support high-performance computing and AI workloads, which directly benefits LRCX’s core etch and deposition equipment portfolio.

With leading foundries and memory players expanding capacity for AI chips, demand for wafer fabrication equipment remains solid. This trend is supporting steady order flows and improving visibility for Lam Research’s Systems revenues in the near term. In the second quarter of fiscal 2026, Systems revenues rose 28% year over year to $3.36 billion.

Lam Research’s new technologies, such as the Aether dry resist extreme ultraviolet (EUV) patterning solution and the Akara conductor etch system, are gaining traction with leading-edge chipmakers. These advanced technologies improve pattern precision and process efficiency, which is essential for the ongoing transition to next-generation nodes like gate-all-around transistors.

We believe that the company’s sustained focus on expanding technological leadership, along with the rising demand for AI and advanced computing chips, will strengthen its foundry business. This will continue driving the company’s Systems revenues in the near term.

Lam Research’s Systems business is well-positioned to benefit from the AI capex boom. The Zacks Consensus Estimate for Systems revenues in fiscal 2026 is pegged at $14.5 billion, indicating a year-over-year increase of 26.2%.

LRCX’s Competitors in the Foundry Equipment Market

Applied Materials, Inc. AMAT and KLA Corporation KLAC are two major competitors of Lam Research in the semiconductor equipment market.

Applied Materials competes directly with LRCX in deposition and etch technologies used in foundry and logic manufacturing. Applied Materials’ large product portfolio and customer relationships with top chipmakers like TSMC and Samsung make it a key player in the chipmaking equipment space.

KLA Corporation specializes in process control and inspection tools that are essential for maintaining yield and quality in advanced chip production. While it doesn’t compete head-to-head with Lam Research in core etch or deposition, KLA Corporation’s process control and inspection tools play a crucial role in the chip-making process.

LRCX’s Share Price Performance, Valuation and Estimates

Shares of Lam Research have surged 191.9% over the past year compared with the Zacks Electronics – Semiconductors industry’s gain of 61.8%.

LRCX One-Year Price Return Performance

Image Source: Zacks Investment Research

From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 35.94, significantly higher than the industry’s average of 27.64.

Lam Research Forward 12-Month P/E Ratio

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 26.6% and 26.9%, respectively. Estimates for fiscal 2026 have been revised downward over the past 30 days, while those for fiscal 2027 have been raised over the past 30 days.

Image Source: Zacks Investment Research

Lam Research currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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