We recently published a list of 10 Undervalued Semiconductor Stocks to Buy According to Analysts. In this article, we are going to take a look at where Lam Research Corporation (NASDAQ:LRCX)) stands against other undervalued semiconductor stocks to buy according to analysts.
Global market intelligence firm IDC, in its most recent report, projected a 15% growth for the global semiconductor market in 2025, driven by the relentless rise in demand for artificial intelligence (AI) and high-performance computing (HPC). According to their analysts, this surge will be fueled by forthcoming upgrades in key application markets, notably cloud data centers. Further emphasizing the industry’s promising growth outlook, Nicolas Gaudois, head of Asia-Pacific technology research at UBS, stated in a recent CNBC interview that AI-compute will continue to underpin growth in 2025. He observed:
“The 21% growth in the semiconductor market was mostly driven by AI-compute demand while non-AI growth actually declined. In 2025, AI would remain the growth driver with 40% growth but we expect non-AI portion to also grow by 17% due to several factors such as autos and industrial markets growth improving, restocking (customers buying for their inventories) in those markets and also increase in semiconductor content in devices to support edge (on-device) AI.”
Nicolas also suggested that GPU chipmakers and foundries will remain the main beneficiaries of AI demand and will make the most money from it. With the semiconductor space ripe for further growth, we have picked 10 semiconductor stocks that are undervalued and are best placed to benefit from this growth.
Our Methodology
To identify the 10 undervalued semiconductor stocks, we carried out thorough research and used stock screeners to compile a list of U.S.-listed companies. Our criteria included a market capitalization of over $2 billion, an expected share price upside of at least 10%, and a Forward PE ratio below 30x. Ultimately, the stocks were ranked in ascending order of their upside potential. These stocks are also popular among elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician operating an automated semiconductor processing machine with laser accuracy.
Lam Research Corporation (NASDAQ:LRCX)
Upside Potential: 14%
Fwd. PE: 23.1
Lam Research Corporation (NASDAQ:LRCX) is a prominent semiconductor equipment manufacturer that supplies wafer fabrication equipment and services to the semiconductor industry. The company’s innovative systems for wafer etching and deposition are crucial for the advanced nodes of semiconductor technology, as they enable the creation of smaller and more efficient integrated circuits for devices.
The increasing demand for high-performance computing and broader AI applications is generating more opportunities for Lam Research Corporation (NASDAQ:LRCX). The company has made significant investments in cutting-edge technologies, such as Gate-All-Around transistor architecture and advanced EUV patterning, which provide a competitive edge over other suppliers. Additionally, Lam Research Corporation (NASDAQ:LRCX) is focused on reducing per-bit costs to enhance the efficiency of existing tools for memory players, thereby creating value for customers.
On January 17, a KeyBanc analyst upgraded the rating on Lam Research Corporation (NASDAQ:LRCX) to ‘Overweight’ from ‘Sector Weight,’ with a price target of $95. According to the analyst, the company is well-positioned to benefit from the AI-driven growth cycle, owing to advancements in memory market technology, particularly in HBM-related offerings. The company’s offerings are expected to benefit from any recovery in the semiconductor market in 2025 and the long-term demand for leading-edge advancements.
Overall, LRCX ranks 10th on our list of undervalued semiconductor stocks to buy according to analysts. While we acknowledge the potential of LRCX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LRCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
