Why Lam Research Rallied Today: Semiconductor Giant Surges on AI Chip Demand

Lam Research rockets 15% as AI chip boom fuels unprecedented equipment orders.

Semiconductor equipment makers bask in reflected glory from NVIDIA's record-breaking earnings. Fabrication tech demand hits all-time highs as foundries scramble to expand capacity.

Wall Street analysts scramble to upgrade price targets—better late than never for the usual herd mentality. The real money already moved weeks ago while traditional analysts were still dusting off their semiconductor supply chain models.

Manufacturing bottlenecks become billion-dollar opportunities. Every chip shortage creates equipment gold rush—Lam's etching systems become the picks and shovels of the AI revolution.

Short sellers retreat as fundamentals finally catch up to the hype. Sometimes even broken clocks get the timing right twice a day.

Key Lam customer Micron gets an upgrade 

Lam Research makes machines that help build semiconductors, especially etch and deposition, and especially etch and deposition tools that stack semiconductor materials vertically. Traditionally, Lam has been more exposed to memory spending than others, but it has also been growing its logic business in recent years, as logic chips contain more vertical components.

But memory is still an important part of Lam's revenue base. That could be why Lam is rallying in the wake of an analyst upgrades for memory-maker(MU 8.60%).

Today, analysts atincreased their price target on Micron from $150 to $175 per share. The Citi analysts are bullish on the outlook for DRAM, which continues to see insatiable demand due to the artificial intelligence (AI) build-out. The analysts write they see the "continued memory upturn is being driven by limited production and better-than-expected demand, particularly from the data center end market."

In addition, Lam's management presented at theCommunacopia Conference yesterday. According to reposts of the transcript on X, formerly known as Twitter, CFO Doug Bettinger gave a bullish outlook, saying that capital intensity for etch and deposition tools is going up.

Furthermore, Taiwanese publication The Commercial Times reported today that memory prices could spike 20% to 50% in the fourth quarter. While the memory industry is cyclical and volatile, that WOULD be quite a big increase, even for an upcycle.

Image source: Getty Images.

Micron will spell things out on Sept. 23

It has been a good week for Micron and Lam Research, with today's MOVE following rises earlier in the week based on confirmation of strong memory demand and massive growth in AI infrastructure over the next few years.

However, investors should remember that the semiconductor industry, and memory segment in particular, is very cyclical. While we appear to be in a massive upcycle today, long-term investors should also be prepared to weather severe downturns as well.

Investors will get more clarity on the visibility of demand when Micron reports earnings on Sept. 23.