8. Lam Research Corporation (NASDAQ:LRCX)
Average Upside Potential: ~51.5%
Number of Hedge Fund Holders: 84
Lam Research Corporation (NASDAQ:LRCX) is engaged in designing, manufacturing, marketing, refurbishing, and servicing semiconductor processing equipment utilized in the fabrication of integrated circuits. Oppenheimer initiated the coverage of the company’s shares with an “Outperform” rating and a price objective of $95. The firm cited Lam Research Corporation (NASDAQ:LRCX)’s dominant position in etch technology and growth potential from NAND upgrades and AI-related demand. The company remains well-placed to benefit as NAND enters a large upgrade cycle, while DRAM remains a bottleneck for the AI compute.
Elsewhere, Cantor Fitzgerald reiterated an “Overweight” rating and the price objective of $100, lauding Lam Research Corporation (NASDAQ:LRCX)’s strategy to enhance its share in the wafer fabrication equipment market. As per Lam Research Corporation (NASDAQ:LRCX), higher demands on chip performance play into its strengths, with advanced deposition and etch applications well-placed to comprise a growing share of WFE. Vltava Fund, an investment management company, published its Q4 2024 investor letter. Here is what the fund said:
“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials and Lam Research Corporation (NASDAQ:LRCX). Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.
Dozens of companies are directly or indirectly involved in the production of semiconductors. Within this broad group of companies, there are several without which it would not be possible to produce advanced types of semiconductors in the world today. These include a group of five very well-known companies, each of which has a dominant global position in its particular field, and which together operate more or less as oligopolies. These are Lam Research, Applied Materials, KLA Corporation, ASML, and Tokyo Electron. At the end of the year, we benefited from a significant correction in the share prices of Applied Materials and Lam Research, and, together with KLA Corporation, we now own three of them. We view these as one collective investment into a critical point within a very important segment of the global economy that is growing and will continue to grow over the long term.
Lam Research manufactures wafer fabrication equipment for the semiconductor industry and also provides related services. The company is a market leader in plasma etching, thin film deposition platforms, photoresist systems, as well as wet and plasma-based cleaning products for individual wafers. Its main customers are the four major semiconductor manufacturers Micron, Samsung, SK Hynix, and Taiwan Semiconductors. Lam Research is a business with net margins of around 27% and ROCE of about 30%. Capital outlays are relatively small. The company has good capital allocation with a preponderance of share buybacks…” (Click here to read the full text)
