Lam Research: A high-quality company in a rapidly expanding sector.

Lam Research is one of the world’s leading suppliers of semiconductor manufacturing equipment, specializing in etch, deposition, and cleaning systems that enable the production of advanced chips. Its technologies play a critical role in powering the devices that drive artificial intelligence, cloud computing, and data centers. With strong financial performance, a large recurring revenue base, and a reputation for innovation, Lam stands at the center of the semiconductor industry’s next growth cycle. The question is: Does this technology leader merit a place in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Lam Research at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Lam Research, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Lam Research, founded in 1980 in California, designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. Its tools are critical for etching, deposition, and cleaning, three of the most essential process steps in chip production. Deposition systems add ultra-thin layers of insulating or conductive materials to silicon wafers using techniques such as chemical vapor deposition and atomic layer deposition. These layers form the fundamental building blocks of a semiconductor, enabling precise interconnects and protective structures. Etch tools, by contrast, selectively remove materials to carve the intricate patterns that define transistors, storage cells, and the electrical pathways inside chips. Cleaning systems remove residues and particles at each step, preserving wafer integrity and maximizing yields. Lam’s technology underpins the production of both memory (3D NAND, DRAM) and logic devices (CPUs, GPUs, ASICs) used in smartphones, cloud servers, automotive electronics, and AI infrastructure. Its broad product portfolio includes industry-leading platforms such as ALTUS for tungsten and molybdenum deposition, SABRE for electrochemical copper deposition, and Kiyo, Flex, and Vantex for advanced etching. Beyond front-end processing, Lam also addresses advanced packaging through wafer-level and fan-out panel-level technologies that improve chip performance and energy efficiency. Its Customer Support Business Group provides spare parts, upgrades, and refurbished tools, extending product lifecycles and generating recurring, service-based revenue. Lam Research has a durable competitive moat built on technological leadership, deep customer integration, and scale advantages. It holds a leading share in plasma etch equipment and a strong position in deposition. Its breakthroughs, such as the replacement of tungsten with molybdenum for certain chip layers and ultra-high-precision etch tools for sub-2 nm nodes, demonstrate its capacity to solve complex manufacturing challenges ahead of competitors. Its tools are often designated as the “tool of record” for critical process steps, embedding them deeply in customer production flows. The company co-develops process solutions with top global chipmakers including TSMC, Samsung, SK Hynix, Micron, and Intel. Once qualified, its tools become integral to customers’ production lines and are rarely displaced, creating high switching costs and long-term relationships. Through its Customer Support Business Group, Lam monetizes its vast installed base via spares, upgrades, and performance optimization services, creating an annuity-like revenue stream that cushions cyclical downturns in capital spending. By offering solutions across etch, deposition, and clean, Lam captures a larger wallet share per fabrication plant and can integrate multiple processes for improved yield and efficiency. With a massive installed base and decades of process data, Lam benefits from powerful feedback loops, each generation of equipment builds on proven designs refined through millions of wafers processed. This cycle of learning reinforces its technological edge and efficiency over time.

Management

Timothy Archer serves as the CEO of Lam Research, a position he has held since December 2018. He joined the company in 2012 as Executive Vice President and COO, playing a central role in scaling Lam’s operations and strengthening its leadership in wafer fabrication equipment before assuming the top role. Timothy Archer brings more than two decades of experience in the semiconductor equipment industry. Prior to joining Lam Research, he spent 18 years at Novellus Systems, where he held a series of leadership positions, including COO, until the company was acquired by Lam in 2012. His background in both engineering and operations has been instrumental in driving Lam’s focus on technological innovation, operational excellence, and customer collaboration. Under Timothy Archer’s leadership, Lam Research has continued to expand its presence as a global leader in etch, deposition, and clean technologies, benefiting from secular trends such as artificial intelligence, 5G, and advanced memory. He has also emphasized investment in research and development to support long-term innovation, enabling Lam to remain at the forefront of process technology for advanced nodes and 3D architectures. Timothy Archer holds a bachelor’s degree in applied physics from the California Institute of Technology and completed the Program for Management Development at the Harvard Graduate School of Business. He also serves on the Board of Directors of SEMI, the global industry association representing the electronics manufacturing and design supply chain. Within Lam Research, he is recognized for fostering a culture of collaboration, innovation, and integrity. Employees rate him highly, with an approval score of 83 out of 100, placing him among the top 5% of CEOs of similarly sized companies. With his extensive technical expertise, operational background, and consistent track record of execution, Timothy Archer is well-positioned to guide Lam Research through the next phase of semiconductor innovation and maintain its leadership amid the industry’s ongoing technological transitions.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Lam Research has consistently achieved a high ROIC because it operates in one of the most profitable segments of the semiconductor equipment industry and has built a strong mix of innovation, customer loyalty, and operational efficiency. The company focuses on etching, deposition, and cleaning, three critical and high-value steps in chip manufacturing where precision is essential and competition is limited. Its technology is deeply embedded in the production processes of leading chipmakers, which gives Lam strong pricing power and stable demand even in cyclical markets. A major reason for its high ROIC is that Lam generates exceptional profitability without needing to continuously expand its capital base at the same pace as its earnings. The company benefits from its large installed base of equipment already operating at customer sites, which continues to produce steady service, spare part, and upgrade revenue through its Customer Support Business Group. These activities require little additional capital but deliver high margins, so they contribute heavily to Lam’s returns. The business also enjoys strong gross margins, thanks to its advanced technology and the critical nature of its tools. In fiscal year 2025, Lam Research’s ROIC increased compared to fiscal year 2024 and reached its third-highest level on record. This improvement came as the semiconductor market began to recover from a downturn, boosting orders from memory and logic manufacturers. With factories running at higher capacity and customers investing in next-generation technologies like 3D NAND, gate-all-around transistors, and advanced packaging, Lam saw better utilization of its installed base and higher revenue per system. The mix of products also shifted toward higher-margin offerings, further improving profitability. Looking ahead, Lam Research is likely to maintain a high ROIC, although it may fluctuate with the semiconductor cycle. The company’s leadership in critical process technologies, long-term partnerships with top customers such as TSMC, Samsung, SK Hynix, and Intel, and strong service-based revenues provide a durable foundation for strong capital efficiency. Structural drivers like artificial intelligence, cloud computing, and advanced chip architectures are increasing the number of etch and deposition steps per wafer, which directly benefits Lam’s business model. While it is unlikely that ROIC will rise sharply beyond current levels, it is expected to remain well above the industry average for years to come.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Equity at Lam Research has increased most years and every year since 2020 because the company has consistently generated strong profitability and retained a significant portion of its earnings to reinvest in the business. Lam operates with high margins and robust free cash flow, driven by its leadership in etch, deposition, and clean technologies. These core processes are essential to advanced chip production, and Lam’s dominant position allows it to capture a substantial share of spending from leading semiconductor manufacturers. The company has also managed its balance sheet conservatively, with limited use of debt and a strong focus on operational efficiency. This discipline means that most of its growth in assets has been funded internally rather than through borrowing, which naturally increases equity over time. In addition, Lam’s recurring service and upgrade business generates stable, high-margin cash flows that contribute to equity expansion even when equipment sales fluctuate. From 2020 to 2025, Lam benefited from structural growth in semiconductor demand, driven by artificial intelligence, cloud computing, and advanced logic and memory technologies, which translated into record revenue and profitability. Looking ahead, equity is expected to continue rising over the long term as Lam remains well positioned to benefit from ongoing advances in chip manufacturing and the increasing complexity of semiconductor devices. The company’s high ROIC and expanding installed base should allow it to keep generating substantial profits and cash flow. However, growth in equity could moderate in certain years if the semiconductor cycle softens or if Lam increases spending on capacity, R&D, or acquisitions. Even so, the long-term trend of rising equity is likely to persist, reflecting a financially strong company that consistently builds shareholder value through retained earnings and disciplined balance sheet management.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Lam Research consistently achieves a high level of free cash flow and a strong levered free cash flow margin because its business model combines high profitability with relatively low ongoing capital requirements. The company designs and manufactures highly specialized semiconductor processing equipment used in etching, deposition, and cleaning, process steps that are both critical and difficult to replace. This gives Lam significant pricing power, leading to high operating margins and strong cash generation from its core operations. Another reason for Lam’s strong free cash flow is its asset-light approach relative to the scale of its earnings. Although the semiconductor equipment industry is capital-intensive for chipmakers, Lam itself does not need to build or operate fabs. Its main investments are in research and development, engineering, and manufacturing facilities, which are modest compared to its revenue base. Because of this, Lam converts a large share of its earnings into cash after capital expenditures. The company also benefits from its large installed base of equipment operating at customer sites around the world. Its Customer Support Business Group provides high-margin, recurring revenue from spare parts, upgrades, and maintenance contracts. This recurring component of the business generates consistent cash inflows, even during cyclical downturns, helping to stabilize free cash flow and maintain high margins. It is reasonable to expect Lam Research to maintain high free cash flow generation over the long term. The company’s technology leadership, recurring service revenue, and disciplined capital spending all support sustained cash flow strength. However, free cash flow may fluctuate with the semiconductor cycle: periods of strong demand typically lead to peak cash generation, while downturns can temporarily reduce inflows. Still, Lam’s resilience and recurring revenue base mean it can remain free cash flow positive even in weaker years. Lam Research primarily uses its free cash flow to strengthen shareholder value. The company reinvests in research and development to maintain its technology leadership, repurchases shares to reduce dilution and enhance earnings per share, and maintains a strong balance sheet to preserve flexibility during downturns. This balanced allocation, focused on innovation, shareholder returns, and financial stability, has allowed Lam to compound value steadily over time while preserving the ability to invest aggressively when new technology inflections arise. The free cash flow yield is at its lowest level in more than a decade, suggesting that the shares are currently trading at a premium. However, we will revisit valuation later in the analysis.

Debt

Another important factor to consider is the level of debt. It is essential to evaluate whether a company carries a manageable amount that could be repaid within three years using its earnings. This can be assessed by dividing total long-term debt by annual earnings. Based on my analysis, Lam Research has only 0,7 years of earnings in debt, which is comfortably within the three-year threshold. In fact, the company has not exceeded this level since 2016, reflecting consistent financial discipline. This indicates that Lam Research’s debt position is well under control and unlikely to pose a risk going forward.

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Risks

Macroeconomic factors are a risk for Lam Research because its performance is closely tied to the health of the global economy and the cyclical nature of the semiconductor industry. The demand for Lam Research’s equipment depends on the capital expenditures of semiconductor manufacturers, which fluctuate based on broader economic conditions such as consumer spending on electronics, corporate technology investments, and overall industrial growth. When economic activity slows, semiconductor manufacturers typically scale back their investment plans, leading to reduced demand for Lam’s equipment. Because each of Lam’s systems represents a substantial capital investment, even moderate cutbacks in customer budgets can lead to sharp declines in revenue. Economic slowdowns can also create additional challenges for Lam Research. Customers might delay payments or cancel orders, which can affect cash flow and increase the risk of losses on unpaid invoices. At the same time, if demand turns out to be weaker than expected, the company could be left with more inventory than it can sell. Because the semiconductor industry moves in cycles, with demand rising and falling based on trends in technology and electronics, these ups and downs can make it difficult for Lam Research to keep revenue steady and run its operations at full efficiency. In addition, Lam must continue to invest heavily in research and development and sustain its global customer support network even during downturns to preserve its technological leadership. Maintaining these expenses while revenues decline can pressure margins and profitability. Broader macroeconomic conditions also influence Lam indirectly. A global slowdown, high interest rates, or restricted access to credit can limit the ability of chipmakers to fund new fabrication plants, delaying orders for Lam’s tools. Inflation in materials and labor can further squeeze margins if Lam is unable to pass higher costs through to customers. Currency movements pose another risk: most of Lam’s sales are denominated in U.S. dollars, but a significant portion of its costs are incurred globally, meaning that a strong dollar can make its equipment more expensive for international customers and reduce competitiveness.

Export restrictions, particularly those involving trade with China, are a major risk for Lam Research because the company depends heavily on international sales and earns a significant share of its revenue from the Chinese market. In fiscal year 2025, China accounted for 34% of Lam’s total revenue, making it one of the company’s most important regions. When the U.S. government introduces or tightens export controls, such as requiring licenses or prohibiting the sale of certain semiconductor tools to Chinese customers, it directly affects Lam’s ability to sell some of its most advanced systems. The company has already lost at least one major NAND customer in China because of these restrictions, which illustrates how quickly such rules can impact revenue. These export controls create significant uncertainty because licenses are not always granted or renewed. Even when approvals are obtained, the process can delay shipments and reduce the company’s operational flexibility. Since China remains one of the fastest-growing markets for semiconductor equipment, Lam faces a long-term risk of losing market share to non-U.S. competitors that are not bound by the same restrictions. If Chinese chipmakers are unable to buy advanced tools from Lam, they may increasingly turn to suppliers in countries such as Japan or South Korea, or accelerate the development of domestic alternatives, gradually eroding Lam’s presence in this key market. The risks are not limited to lost sales. Export restrictions can disrupt customer relationships, limit Lam’s ability to provide on-site services or upgrades, and complicate supply chain management if certain components or software fall under restricted categories. Retaliatory actions from China could further worsen the situation. The Chinese government could respond by promoting local equipment manufacturers, imposing regulatory hurdles for U.S. suppliers, or encouraging technology transfers that give local competitors an advantage. Lam’s exposure is amplified by its global footprint, meaning that any trade or regulatory conflict between major economies could have a material impact. Beyond China, escalating geopolitical tensions, such as a potential conflict involving Taiwan (home to TSMC, one of Lam’s largest customers), could severely disrupt the semiconductor supply chain and Lam’s operations. The company is also exposed to changing trade policies, tariffs, and sanctions in other regions, all of which could increase costs or restrict access to key markets.

Competition is a significant risk for Lam Research because the semiconductor equipment industry is fast-moving, and highly dependent on continuous technological innovation. To remain competitive, Lam must constantly anticipate its customers’ future needs and deliver new tools that meet the demanding technical requirements of advanced chip manufacturing. If the company fails to innovate at the right pace or allocate enough resources to the right technologies, it risks losing ground to better-positioned competitors that can respond more quickly to market changes. Lam’s main competitors, including Applied Materials, Tokyo Electron, and KLA Corporation, are large, well-funded companies that also focus heavily on etching, deposition, and inspection technologies. These rivals often have broader product portfolios, larger engineering teams, and deeper customer relationships, which enable them to bundle offerings or negotiate favorable long-term supply agreements. A breakthrough by one of these competitors, such as a new deposition technique or a more efficient etch process, could quickly erode Lam’s market share and pressure its margins. The company also faces the risk that new or improved manufacturing techniques, such as extreme ultraviolet (EUV) lithography, could reduce the number of deposition and etch steps needed to produce chips, decreasing demand for Lam’s tools. Competition is intensifying further due to industry consolidation and the emergence of regionally focused players, particularly in China and South Korea, some of which receive substantial government funding. These new competitors may sell equipment at lower prices, offer financial incentives, or operate under looser export restrictions, making it harder for Lam to compete on both technology and cost. In some cases, Lam also faces competition from its own customers, as large chipmakers have begun developing certain types of fabrication tools internally to reduce dependency on U.S. suppliers. Another challenge is that once a semiconductor manufacturer qualifies a competitor’s equipment for use in a production line, it typically continues to buy from that supplier for the same application. The qualification process is expensive and time-consuming, so switching vendors is rare. This creates high barriers for Lam when trying to win over customers already aligned with other equipment providers.

Reasons to invest

Increased wafer fabrication equipment (WFE) spending is a reason to invest in Lam Research because it directly expands the company’s addressable market and strengthens demand for its core technologies. WFE spending, the total investment by semiconductor manufacturers in tools and machinery used to produce chips, is expected to exceed $100 billion in calendar 2025 and grow further in the years ahead. This growth is driven by powerful long-term trends such as artificial intelligence, cloud computing, and data center expansion, all of which require more complex, performance-intensive chips that rely heavily on Lam’s etching and deposition technologies. Artificial intelligence in particular is transforming the semiconductor landscape. The massive buildout of data centers to support AI workloads is projected to require around $200 billion in WFE investment over the next five years. These chips and systems demand advanced architectures and packaging techniques that are increasingly reliant on Lam’s technologies. For instance, 3D NAND memory devices now exceed 200 layers, requiring additional etch and deposition steps that Lam’s tools enable. Similarly, the move toward high-bandwidth memory in DRAM, which supports faster and more efficient AI computing, depends on Lam’s precision etch and void-free fill capabilities. In foundry and logic markets, new transistor designs such as gate-all-around structures and backside power distribution are driving demand for Lam’s atomic layer deposition, selective etch, and copper plating systems, all areas where the company holds leading positions. Lam’s strategy is not only to benefit from overall WFE growth but also to expand its served available market (SAM), the portion of WFE spending where it competes. The company expects its SAM to rise from the low 30% range of WFE today to the high 30% range by the end of the decade, capturing more than half of the incremental opportunities. Overall, rising WFE spending signals a multi-year growth opportunity for Lam Research. The shift toward 3D scaling, higher memory density, and more advanced packaging means that each new generation of chips requires more etch and deposition intensity, precisely the areas where Lam leads the market.

The Customer Support Business Group (CSBG) is a key reason to invest in Lam Research because it provides the company with a stable and growing source of recurring revenue while strengthening customer loyalty and expanding long-term value. Unlike Lam’s systems business, which depends on cyclical chipmaking investments, CSBG generates steady income from the company’s massive installed base of equipment, nearly 100.000 chambers worldwide. Every tool that Lam sells creates an ongoing demand for spare parts, upgrades, and maintenance services, making CSBG a reliable contributor to cash flow even during industry downturns. In fiscal year 2025, CSBG achieved record revenue, demonstrating the strength and resilience of this part of the business. As semiconductor devices become increasingly complex, chipmakers rely more heavily on Lam’s expertise to maximize equipment performance and yield. Through its global service network, Lam helps customers extend the lifespan and productivity of their tools, offering cost-effective upgrades and process enhancements that keep existing systems competitive with newer generations. This is particularly important as many memory manufacturers begin modernizing older fabs, a trend that is expected to drive further demand for CSBG’s upgrade solutions. Lam is also transforming how semiconductor maintenance is performed through innovations like Dextro, the industry’s first collaborative maintenance robot. Dextro uses advanced automation and Lam’s Equipment Intelligence platform to deliver highly precise and repeatable maintenance cycles, improving tool availability, matching, and yield while reducing operational costs. These autonomous service capabilities are a step toward the vision of the “self-optimizing fab,” where intelligent systems help customers maintain peak performance with minimal human intervention. The continued rollout of Dextro across additional tool types and customers underlines Lam’s leadership in this emerging area. Importantly, CSBG’s success reinforces Lam’s core systems business. By ensuring high uptime, consistent performance, and seamless upgrades, CSBG strengthens customer relationships and enhances Lam’s reputation as a trusted partner. This synergy increases the likelihood that customers will choose Lam again for future technology nodes and fab expansions.

Innovation is a key reason to invest in Lam Research because the company has consistently demonstrated an ability to anticipate and develop the advanced technologies needed for the next generation of semiconductor manufacturing. The semiconductor industry is driven by continuous technological inflection points, new materials, new chip architectures, and new manufacturing methods, and Lam’s long-term success has come from being at the forefront of these transitions. In fiscal year 2025, Lam expanded its portfolio of breakthrough products that directly address some of the industry’s most pressing technical challenges, positioning it to capture a larger share of industry growth. One of Lam Research’s key strengths lies in its ability to develop technologies that solve the semiconductor industry’s most complex challenges. Recent breakthroughs include the ALTUS Halo ALD system, which enables the transition from tungsten to molybdenum in advanced devices, improving conductivity and performance at sub-2-nanometer nodes. Lam is currently the only company with this capability in production across both NAND and foundry/logic markets, giving it a strong first-mover advantage as adoption of molybdenum accelerates. The company’s Akara conductor etch tool is another milestone, offering exceptional precision and control when etching the deep, narrow structures required for next-generation DRAM and logic chips. Its early success with leading memory manufacturers highlights its potential for multigenerational adoption. Finally, Lam’s SABRE 3D copper plating system is setting new standards in advanced packaging, a fast-growing segment critical for AI and data center performance. Leveraging decades of expertise in plating and materials engineering, Lam has established itself as a leader in this field, with demand expected to rise as advanced packaging becomes more widely used across the semiconductor industry. These innovations are not isolated successes but part of a broader R&D roadmap that aligns with the future needs of the semiconductor industry. Lam has spent decades developing expertise in atomic-scale precision, materials engineering, and plasma physics, areas that are becoming increasingly critical as devices move toward 3D scaling, high-bandwidth memory, gate-all-around transistors, and new materials such as molybdenum and carbon. The company’s early investments in these fields mean that many of its tools are already qualified and in customers’ R&D labs, ready to ramp as new manufacturing nodes come online.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 4.,15, which is from fiscal year 2025. I have selected a projected future EPS growth rate of 12% (Finbox expects EPS to grow by 12% the next five years). Additionally, I have chosen a projected future P/E ratio of 24, which is twice the growth rate. This decision is based on the fact that Lam Research has historically had a higher P/E ratio. Lastly, our minimum acceptable rate of return is already set at 15%. Doing the calculations, we come up with the sticker price (some call it fair value or intrinsic value) of $76,46. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Lam Research at a price of $38,23 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is called the Ten Cap price. The rate of return that an owner of a company (or stock) receives on the purchase price of the company is essentially its return on investment. The return should be at least 10% annually, and I calculate it as follows: The operating cash flow last year was 6.173 and capital expenditures were 759. I attempted to review their annual report to determine the percentage of capital expenditures allocated for maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 531 in our calculations. The tax provision was 600. We have 1.279 outstanding shares. Hence, the calculation will be as follows: (6.173 – 531 + 600) / 1.279 x 10 = $48,80 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Lam Research's Free Cash Flow Per Share at $4,23 and a growth rate of 12%, if you want to recoup your investment in 8 years, the Payback Time price is $58,27.

Conclusion

I believe that Lam Research is an intriguing company with excellent management. The company has built a strong competitive moat through technological leadership, close customer relationships, and scale advantages. It has consistently delivered high ROIC, strong free cash flow, and solid margins, a trend that is expected to continue. However, macroeconomic factors remain a risk since Lam’s performance depends on semiconductor manufacturers’ capital spending, which fluctuates with global economic conditions. Economic slowdowns can lead customers to delay or reduce equipment purchases, putting pressure on revenue and profitability. Export restrictions also pose a significant challenge, as Lam relies heavily on international sales, with China representing 34% of revenue in fiscal year 2025. U.S. trade controls can restrict sales of advanced tools, disrupt customer relationships, and benefit foreign or domestic Chinese competitors. Competition is another key risk because the semiconductor equipment industry evolves rapidly, requiring continuous innovation and flawless execution. Rivals like Applied Materials and Tokyo Electron, along with new government-backed players, could capture market share through broader product portfolios, lower pricing, or established customer ties. On the positive side, increased wafer fabrication equipment (WFE) spending provides a major opportunity, as semiconductor makers are projected to invest over $100 billion in new tools to meet the growing demand from artificial intelligence, data centers, and advanced chip architectures. Lam is well positioned to benefit from this expansion due to its leadership in etch and deposition technologies. Its Customer Support Business Group (CSBG) adds resilience by generating stable, recurring revenue from its large installed base, supported by upgrades, services, and innovations like the Dextro maintenance robot, which improves productivity and strengthens customer loyalty. Moreover, Lam’s culture of innovation continues to set it apart, with technologies such as the Halo ALD, Akara etch, and SABRE 3D systems addressing key challenges in materials, scaling, and packaging. Altogether, I believe Lam Research is a high-quality company, and purchasing shares near the intrinsic value of the Ten Cap price of $97 would represent an attractive long-term investment opportunity.

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