Lam Research Stock Tanks: What’s Dragging the Chip Giant Down Today?

Another brutal day for Lam Research shareholders as the stock takes a nosedive. Here’s why the semiconductor equipment maker is bleeding value—and whether this is a buying opportunity or a sinking ship.

Earnings Miss or Macro Mess?

Wall Street’s favorite whipping boy strikes again. Lam just joined the growing list of tech firms getting punished for not meeting inflated expectations—even if the miss was marginal. Supply chain? Demand slowdown? Or just another excuse to rotate out of tech?

Short-Term Pain for Long-Term Gain?

Semiconductors remain the backbone of everything from AI to IoT. Lam’s dip might just be noise in a sector that prints money long-term. Then again, ‘long-term’ doesn’t pay the bills for traders staring at red portfolios today.

The Bottom Line:

Another reminder that in today’s market, fundamentals are optional—but reacting to headlines is mandatory. Funny how ‘buy the dip’ only works when it’s not your stock getting dumped.

Image source: Getty Images.

Lam Research's Q2 earnings

It turns out I was right to worry about Lam Research stock -- but for the life of me, I don't know why!

Two weeks ago, ASML's earnings report showed sales growth of less than 1%, and a slowdown in bookings foreshadowing a slowdown in demand for artificial intelligence (AI) chips -- or at least for the machines that make them. But based on Lam Research's last-night report, it now seems Lam is not suffering anywhere NEAR the ill-effects that ASML is.

To the contrary.

In Q2, analysts forecast Lam WOULD earn $1.21 per share on $5 billion in sales. In fact, the company reported generally accepted accounting principles (GAAP) profit of $1.35 and sales of $5.2 billion. Sales grew a respectable 10% year over year, and earning surged 31%. Management even delivered great guidance -- $1.10 to $1.30 in profit for Q3, and sales between $4.9 billion and $5.5 billion, both numbers much better than Wall Street had forecast.

Is Lam Research stock a sell?

Mind you, I'm still a little leery of Lam's valuation. Priced near 27 times trailing earnings, and even more expensive when valued on free cash flow, the stock looks risky to me if Lam can't deliver on the guidance it gave. Still, 31% earnings growth in Q2 goes a long way to allaying those concerns.

Lam stock may not be cheap enough to buy -- but I wouldn't call it a "sell" either.