Lam Research Corporation (NASDAQ:LRCX) is poised for robust growth in 2026 despite China-related challenges, driven by strong demand for advanced foundry, DRAM, and NAND upgrades, with AI-related investments further boosting its wafer fabrication opportunities and long-term earnings potential.
According to a research note, Bank of America Securities analyst Vivek Arya named Lam Research his top pick in the semiconductor equipment sector, maintaining a Buy rating and setting a price forecast of $165.
Top Semiconductor Equipment Pick
Arya identified Lam Research as his top pick in the semiconductor equipment sector, arguing the company is poised for strong growth outside of China even as new U.S. trade restrictions take effect.
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The analyst noted that Lam Research reported September quarter results and provided a December quarter outlook that both handily beat Wall Street expectations.
He noted that the strong guidance was particularly impressive, given the headwind of an estimated $200 million due to the new China rules.
Management also increased its forecast for the 2025 Wafer Fab Equipment (WFE) market, and Arya anticipated another strong growth year for the industry in 2026.
Projected Ex-China Growth to Offset Trade Headwinds
While the full-year impact of the China restrictions will create a significant headwind for Lam, the analyst projected that the company’s business excluding China can still grow by more than 20% in 2026.
He expected this growth from leading-edge foundry, logic, and DRAM customers, noting that Lam can continue gaining market share.
Arya pointed out that Lam’s equipment sales are on track to grow roughly four times faster than the overall WFE market in 2025.
Margin Expansion
The analyst also noted a clear path for Lam to expand its gross margins to over 50%, which he contrasted favorably with key rival Applied Materials, Inc. (NASDAQ:AMAT), whose margins may remain in the high-40% range.
Looking long-term, he argued that recent AI-related deals support the company’s ambitious financial targets.
Price Action: LRCX stock was trading higher by 4.78% to $148.00 at last check Thursday.
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