BofA’s List Of AI & Semiconductor Stocks That Fund Managers Love & Hate: 16 Stocks On The Manager Radar

12. Lam Research Corporation (NASDAQ:LRCX)

Number of Hedge Fund Holders In Q2 2024: 84

Section: Losing Popularity

Lam Research Corporation (NASDAQ:LRCX) is a semiconductor manufacturing equipment provider that is one of the few of its kind in the US. The firm provides machines used in several phases of chip manufacturing such as etching circuits on silicon wafers. On the surface, this would imply that Lam Research Corporation (NASDAQ:LRCX) should be one of the top fund manager stocks due to its exposure to chip manufacturing which many analysts expect to boom due to AI chip demand. However, digging deeper, the reasons behind the pessimism are clear. For starters, 42% of Lam Research Corporation’s (NASDAQ:LRCX) fiscal year 2024 revenue came from China and given the prolonged economic slowdown in the country, this exposure isn’t helping with investor sentiment. Secondly, 42% of Lam Research Corporation’s (NASDAQ:LRCX) $14.9 billion in FY revenue was from memory chips, and the broader memory industry struggled for most of 2023. However, looking ahead, catalysts in the form of TSMC moving to advanced chip technologies and memory seeing tailwinds from AI demand could materialize.

Artisan Partners mentioned Lam Research Corporation (NASDAQ:LRCX) in its Q2 2024 investor letter. Here is what the fund said:

“The top contributors to performance for the quarter were Alphabet, Lam Research Corporation (NASDAQ:LRCX) and Elevance. Lam Research shares rose 10% during the quarter and are up 67% over the past year, primarily due to optimism around the pending investment cycle in semiconductor capital expenditures. Lam is one of the largest equipment manufacturers used to make semiconductor chips. This equipment, commonly referred to as WFE (wafer fabrication equipment), is expected to experience significant growth due to a combination of a cyclical rebound in memory chips and growing demand for new AI-related chips. Lam’s product portfolio is particularly well positioned to benefit from both trends and should grow even faster than the overall market. Its shares now trade at ~30X prior peak earnings, which suggests this dynamic is well understood by the market and is mostly priced in.”