Shares of semiconductor equipment supplier Lam Research (NASDAQ: LRCX) lost ground Thursday morning, and were trading down 4.7% as of 12:25 p.m. ET. This is notable as Lam is missing out on the rebound many stocks are experiencing following Wednesday’s market rout.
Lam’s decline was set off by the tepid outlook that one of its key customers delivered Wednesday afternoon. But for investors, this share price dip in a company that’s positioned to be a long-term beneficiary of the AI revolution may offer an opportunity to buy rather than a reason to stay away.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
After the market closed Wednesday afternoon, Micron Technology (NASDAQ: MU) reported its fiscal 2025 first-quarter earnings. While its results were relatively in line with expectations, its outlook for the fiscal second quarter disappointed the market mightily. Micron’s management noted that the AI data center build-out is still going strong; however, the consumer-oriented PC and smartphone segments were weak, as they have been since mid-2022. PC and phone memory chips are still large parts of Micron’s business, so its fiscal second-quarter guidance was well below expectations.
Moreover, Micron specifically pointed to NAND flash memory as being especially weak, while noting that the DRAM memory market was stronger. This may be why Lam is faring worse than other equipment suppliers on Thursday; it has traditionally dominated the semiconductor capital equipment space in the niche related to the vertical stacking of NAND modules.
Micron said that it would reduce its capital expenditures for NAND manufacturing this year, and also said that the pace of NAND investments across the industry will need to slow for chipmakers to attain better profitability. Given that it’s viewed as the NAND equipment leader, it’s no surprise to see Lam Research falling in the wake of that commentary.
While the situation may seem dire, investors should appreciate that investments in NAND manufacturing have been extremely low for several years, and that Lam has repositioned its business to become more balanced between the NAND, DRAM, and logic markets. In fact, last quarter, NAND flash memory equipment only accounted for 11% of Lam’s revenue. DRAM memory, which appears to still be strong, made up 24%, and logic and foundry sales combined to make up 65% of sales.
So while its near-term outlook may look unimpressive, Lam’s results shouldn’t be at risk of too much of a decline, although its growth may be a little slower. Trading at 22 times earnings, Lam’s stock isn’t at a demanding valuation, given that the AI build-out appears to be continuing.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $334,266!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,976!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $479,727!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 16, 2024
Billy Duberstein and/or his clients have positions in Lam Research and Micron Technology. The Motley Fool has positions in and recommends Lam Research. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
