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Lam Research vs. Applied Materials: Which AI Chip Stock Has the Edge?
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Key Takeaways
Applied Materials is positioned as the stronger pick in the AI equipment boom in this comparison.
AMAT's AIx links 35,000 chambers and cuts response times 30%, boosting fab productivity.
AMAT trades at 9.13X forward P/E versus Lam Research's 11.74X despite margin gains.
Lam Research Corporation (LRCX - Free Report) and Applied Materials, Inc. (AMAT - Free Report) are among the biggest beneficiaries of the global artificial intelligence (AI) boom. Both companies supply advanced wafer fabrication tools used to manufacture high-performance chips for AI servers, memory and advanced packaging. They compete directly in critical etch and deposition markets, where demand is surging as chipmakers expand capacity for AI workloads.
However, while both companies are seeing strong momentum from AI-led semiconductor spending, their growth profiles, margins, product diversification and valuation levels are beginning to diverge. Amid this scenario, investors must be wondering which semiconductor equipment stock offers the better risk-reward opportunity in the current AI cycle.
LRCX: Strong AI Momentum but Heavy Memory Dependence
Lam Research continues to benefit from rising AI-driven demand across NAND, DRAM and foundry markets. During the last earnings call, the company raised its 2026 wafer fabrication equipment (WFE) spending outlook to $140 billion from $135 billion, reflecting stronger customer spending across semiconductor segments.
In the company’s last reported financial results for the third quarter of fiscal 2026, total revenues rose 23.8% year over year to $5.84 billion and beat the Zacks Consensus Estimate by 1.3%, primarily driven by continued demand across the Systems and Customer Support Business Group segments. Lam Research’s non-GAAP earnings per share (EPS) surged 41.3% year over year to $1.47 and surpassed the consensus estimate by 8.1%.
Lam Research Corporation Price, Consensus and EPS Surprise
LRCX’s biggest strength lies in etch and deposition intensity tied to advanced AI chips and high-bandwidth memory. During the last earnings call, management highlighted that AI workloads are accelerating demand for higher-layer NAND and advanced DRAM nodes, areas where Lam Research has strong technological leadership. The company expects advanced packaging revenues to grow more than 50% in calendar year 2026. Its customer support business also crossed the $2 billion quarterly revenue mark for the first time, providing recurring revenue strength.
Margins are also improving steadily. Non-GAAP gross margin increased 20 basis points (bps) sequentially to 49.9% in the third quarter, while fourth-quarter guidance points to further expansion and reach 50.5%. Non-GAAP operating margin grew 70 bps quarter over quarter to 35% and is expected to reach 36.5% in the fourth quarter, supported by manufacturing efficiencies and strong product demand.
However, Lam Research still faces some risks. The company remains heavily exposed to memory spending cycles, particularly NAND and DRAM. Any slowdown in AI memory demand or delays in customer spending could hurt growth. China also accounted for 34% of revenues in the third quarter, leaving LRCX exposed to geopolitical risks and export restrictions. Lam Research’s narrower product portfolio compared with Applied Materials makes it relatively more dependent on a few technology transitions.
AMAT: Broad AI Exposure and Diversified Growth Engine
Applied Materials is benefiting from the same AI-driven semiconductor expansion, but its broader product portfolio and diversified customer exposure provide stronger long-term stability. The company reported second-quarter fiscal 2026 revenues of $7.91 billion, up 11% year over year, while non-GAAP EPS climbed 20% to $2.86.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Non-GAAP gross margin improved 90 bps quarter over quarter and reached 50%, while non-GAAP operating margin expanded 210 bps sequentially to 32.1%. Applied Materials attributed margin expansion to value-based pricing on differentiated products and ongoing manufacturing cost improvements while also emphasizing continued investment in R&D and operational readiness to support customer growth.
Applied Materials believes AI adoption is accelerating demand across leading-edge foundry, DRAM and advanced packaging markets, which are expected to drive more than 80% of 2026 WFE spending growth. The company is particularly well-positioned because it holds leadership positions across multiple semiconductor process technologies rather than depending heavily on one segment.
One of Applied Materials’ biggest advantages is its extensive services and AI-enabled software ecosystem. At the end of the second quarter, more than 35,000 chambers are connected to its AIx platform, which uses AI-powered diagnostics and predictive maintenance to improve wafer output and reduce downtime for customers. During the earnings call, AMAT stated that AIx has enabled response times that are 30% faster, improving fab productivity.
Applied Materials is also gaining momentum in advanced packaging and panel-level packaging technologies, which are becoming increasingly important for AI chips and high-bandwidth memory integration. AMAT continues to expand manufacturing capacity globally while investing aggressively in R&D to capture future AI semiconductor demand.
Lam Research vs. Applied Materials: Growth Outlook
The Zacks Consensus Estimate for LRCX’s fiscal 2026 and 2027 revenues implies a year-over-year increase of 24.9% and 29%, respectively. Estimates for fiscal 2026 and 2027 EPS suggest year-over-year growth of 37% and 36.5%, respectively.
AMAT’s fiscal 2026 and 2027 revenues are projected to increase 14.7% and 23.3%, respectively. EPS is forecast to grow 24.7% in fiscal 2026 and 30.7% in fiscal 2027.
While Lam Research is expected to deliver faster near-term growth, much of that upside depends on continued strength in memory spending. Applied Materials may not be growing as aggressively, but its broader exposure makes its outlook appear more balanced and potentially less volatile.
Valuation Comparison: AMAT Looks Cheaper Than LRCX
Valuation currently gives Applied Materials a clear edge over Lam Research. Applied Materials trades at a forward 12-month price-to-earnings (P/E) multiple of 9.13X, significantly lower than Lam Research’s 11.74X. Despite the cheaper valuation, Applied is delivering strong AI-driven growth, expanding margins and improving operating leverage.
Image Source: Zacks Investment Research
Lam Research deserves a premium for its leadership in etch and deposition equipment, especially in memory technologies. However, Applied Materials’ broader portfolio, larger AI exposure across foundry, DRAM and packaging and stronger diversification make its lower valuation more attractive.
Over the past year, shares of Lam Research and Applied Materials have surged 230.2% and 150.8%, respectively.
Image Source: Zacks Investment Research
Final Take: AMAT Seems a Better Investment Option
Both Lam Research and Applied Materials are well-positioned to benefit from the AI infrastructure boom and rising semiconductor equipment spending. LRCX offers impressive momentum in memory, advanced packaging and customer support services, while its margins continue to improve.
However, Applied Materials appears to have the stronger overall investment case right now. Its diversified semiconductor exposure, leadership across multiple process technologies, growing AI software ecosystem and cheaper valuation provide a better balance between growth and risk. While Lam Research could deliver sharper upside if memory spending remains strong, AMAT looks better positioned to generate steadier long-term growth as AI semiconductor demand continues expanding through 2027 and beyond.
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Lam Research vs. Applied Materials: Which AI Chip Stock Has the Edge?
Key Takeaways
Lam Research Corporation (LRCX - Free Report) and Applied Materials, Inc. (AMAT - Free Report) are among the biggest beneficiaries of the global artificial intelligence (AI) boom. Both companies supply advanced wafer fabrication tools used to manufacture high-performance chips for AI servers, memory and advanced packaging. They compete directly in critical etch and deposition markets, where demand is surging as chipmakers expand capacity for AI workloads.
However, while both companies are seeing strong momentum from AI-led semiconductor spending, their growth profiles, margins, product diversification and valuation levels are beginning to diverge. Amid this scenario, investors must be wondering which semiconductor equipment stock offers the better risk-reward opportunity in the current AI cycle.
LRCX: Strong AI Momentum but Heavy Memory Dependence
Lam Research continues to benefit from rising AI-driven demand across NAND, DRAM and foundry markets. During the last earnings call, the company raised its 2026 wafer fabrication equipment (WFE) spending outlook to $140 billion from $135 billion, reflecting stronger customer spending across semiconductor segments.
In the company’s last reported financial results for the third quarter of fiscal 2026, total revenues rose 23.8% year over year to $5.84 billion and beat the Zacks Consensus Estimate by 1.3%, primarily driven by continued demand across the Systems and Customer Support Business Group segments. Lam Research’s non-GAAP earnings per share (EPS) surged 41.3% year over year to $1.47 and surpassed the consensus estimate by 8.1%.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
LRCX’s biggest strength lies in etch and deposition intensity tied to advanced AI chips and high-bandwidth memory. During the last earnings call, management highlighted that AI workloads are accelerating demand for higher-layer NAND and advanced DRAM nodes, areas where Lam Research has strong technological leadership. The company expects advanced packaging revenues to grow more than 50% in calendar year 2026. Its customer support business also crossed the $2 billion quarterly revenue mark for the first time, providing recurring revenue strength.
Margins are also improving steadily. Non-GAAP gross margin increased 20 basis points (bps) sequentially to 49.9% in the third quarter, while fourth-quarter guidance points to further expansion and reach 50.5%. Non-GAAP operating margin grew 70 bps quarter over quarter to 35% and is expected to reach 36.5% in the fourth quarter, supported by manufacturing efficiencies and strong product demand.
However, Lam Research still faces some risks. The company remains heavily exposed to memory spending cycles, particularly NAND and DRAM. Any slowdown in AI memory demand or delays in customer spending could hurt growth. China also accounted for 34% of revenues in the third quarter, leaving LRCX exposed to geopolitical risks and export restrictions. Lam Research’s narrower product portfolio compared with Applied Materials makes it relatively more dependent on a few technology transitions.
AMAT: Broad AI Exposure and Diversified Growth Engine
Applied Materials is benefiting from the same AI-driven semiconductor expansion, but its broader product portfolio and diversified customer exposure provide stronger long-term stability. The company reported second-quarter fiscal 2026 revenues of $7.91 billion, up 11% year over year, while non-GAAP EPS climbed 20% to $2.86.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote
Non-GAAP gross margin improved 90 bps quarter over quarter and reached 50%, while non-GAAP operating margin expanded 210 bps sequentially to 32.1%. Applied Materials attributed margin expansion to value-based pricing on differentiated products and ongoing manufacturing cost improvements while also emphasizing continued investment in R&D and operational readiness to support customer growth.
Applied Materials believes AI adoption is accelerating demand across leading-edge foundry, DRAM and advanced packaging markets, which are expected to drive more than 80% of 2026 WFE spending growth. The company is particularly well-positioned because it holds leadership positions across multiple semiconductor process technologies rather than depending heavily on one segment.
One of Applied Materials’ biggest advantages is its extensive services and AI-enabled software ecosystem. At the end of the second quarter, more than 35,000 chambers are connected to its AIx platform, which uses AI-powered diagnostics and predictive maintenance to improve wafer output and reduce downtime for customers. During the earnings call, AMAT stated that AIx has enabled response times that are 30% faster, improving fab productivity.
Applied Materials is also gaining momentum in advanced packaging and panel-level packaging technologies, which are becoming increasingly important for AI chips and high-bandwidth memory integration. AMAT continues to expand manufacturing capacity globally while investing aggressively in R&D to capture future AI semiconductor demand.
Lam Research vs. Applied Materials: Growth Outlook
The Zacks Consensus Estimate for LRCX’s fiscal 2026 and 2027 revenues implies a year-over-year increase of 24.9% and 29%, respectively. Estimates for fiscal 2026 and 2027 EPS suggest year-over-year growth of 37% and 36.5%, respectively.
AMAT’s fiscal 2026 and 2027 revenues are projected to increase 14.7% and 23.3%, respectively. EPS is forecast to grow 24.7% in fiscal 2026 and 30.7% in fiscal 2027.
While Lam Research is expected to deliver faster near-term growth, much of that upside depends on continued strength in memory spending. Applied Materials may not be growing as aggressively, but its broader exposure makes its outlook appear more balanced and potentially less volatile.
Valuation Comparison: AMAT Looks Cheaper Than LRCX
Valuation currently gives Applied Materials a clear edge over Lam Research. Applied Materials trades at a forward 12-month price-to-earnings (P/E) multiple of 9.13X, significantly lower than Lam Research’s 11.74X. Despite the cheaper valuation, Applied is delivering strong AI-driven growth, expanding margins and improving operating leverage.
Image Source: Zacks Investment Research
Lam Research deserves a premium for its leadership in etch and deposition equipment, especially in memory technologies. However, Applied Materials’ broader portfolio, larger AI exposure across foundry, DRAM and packaging and stronger diversification make its lower valuation more attractive.
Over the past year, shares of Lam Research and Applied Materials have surged 230.2% and 150.8%, respectively.
Image Source: Zacks Investment Research
Final Take: AMAT Seems a Better Investment Option
Both Lam Research and Applied Materials are well-positioned to benefit from the AI infrastructure boom and rising semiconductor equipment spending. LRCX offers impressive momentum in memory, advanced packaging and customer support services, while its margins continue to improve.
However, Applied Materials appears to have the stronger overall investment case right now. Its diversified semiconductor exposure, leadership across multiple process technologies, growing AI software ecosystem and cheaper valuation provide a better balance between growth and risk. While Lam Research could deliver sharper upside if memory spending remains strong, AMAT looks better positioned to generate steadier long-term growth as AI semiconductor demand continues expanding through 2027 and beyond.
Currently, Applied Materials sports a Zacks Rank #1 (Strong Buy), while Lam Research carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.