LRCX vs. AMAT: Which Chip-Equipment Stock Is a Better Buy Right Now?

Lam Research LRCX and Applied Materials AMAT are two of America’s leading semiconductor manufacturing equipment companies, both playing a critical role in powering the artificial intelligence (AI)-driven boom in chip fabrication. As chipmakers rush to expand capacity for advanced nodes used in AI, 5G and high-performance computing, these two stocks have attracted significant attention.

While both benefit from the same industry tailwinds, their fundamentals, growth outlook and valuations offer different risk-reward profiles for investors considering semiconductor infrastructure exposure. Let’s see which stock is a better buy right now based on the abovementioned factors.

The Case for Lam Research Stock

Lam Research is capitalizing on AI trends. It builds the tools chipmakers need to manufacture next-generation semiconductors, including high-bandwidth memory and chips used in advanced packaging. These technologies are vital for powering AI and cloud data centers.

Lam Research’s products are not only critical but also innovative. For example, its ALTUS ALD tool uses molybdenum to improve speed and efficiency in chip production. Another product, the Aether platform, helps chipmakers achieve higher performance and density. These are essential capabilities as demand for advanced AI chips increases.

In 2024, Lam Research’s shipments for gate-all-around nodes and advanced packaging exceeded $1 billion, and management expects this figure to triple to more than $3 billion in 2025. Additionally, the industry’s migration to backside power distribution and dry-resist processing presents growth opportunities for LRCX’s cutting-edge fabrication solutions.

These trends are aiding Lam Research’s financial performance. In the fourth quarter of fiscal 2025, the company reported revenues of $5.17 billion, up 34% year over year, and non-GAAP EPS of $1.33, highlighting a 64% increase.

The Case for Applied Materials Stock

Applied Materials is a global leader in the supply chain of semiconductor fabrication equipment, covering deposition, etching and inspection — key processes in chip manufacturing. The company’s long-term growth prospects remain highly compelling due to its leadership in AI-driven semiconductor technology.

Due to the proliferation of AI and its rapid adoption by enterprises, Applied Materials is experiencing strong traction in its Sym3 Magnum etch system, Cold Field Emission eBeam technology, gate-all-around, backside power delivery and 3D DRAM technology nodes crucial for developing high-performance processing and memory chips used for AI and HPC workloads.

Applied Materials’ Sym3 Magnum etch system has generated more than $1.2 billion in revenues since its launch in February 2024. Additionally, management projects AMAT's revenues from DRAM customers to grow more than 40% in fiscal 2025.

Earlier, AMAT reported that its revenues from advanced semiconductor nodes crossed $2.5 billion in 2024, and it expected the figure to double in fiscal 2025 as customers’ adoption of its GAA and backside power delivery solutions grows. These factors are strongly reflected in AMAT’s top and bottom-line growth. In the second quarter of fiscal 2025, revenues grew 6.8% year over year, while non-GAAP EPS soared 14.4%.

LRCX vs. AMAT: Which Has a Greater Growth Profile?

Looking at the Zacks Consensus Estimates for revenues and EPS, the two companies seem to have a similar growth profile. The consensus mark for Lam Research’s fiscal 2026 and 2027 revenues indicates year-over-year growth in the mid-single-digit range, while that for non-GAAP EPS ranges in the mid-high single-digit percentage.

Similarly, Applied Materials’ revenue estimates for fiscal 2025 and 2026 indicate growth in the mid-single-digit percentage range and EPS growth between the mid and high-single-digit band.

Valuation: Lam Research Trades at a Higher Premium

When comparing valuations, Lam Research currently trades at a higher forward 12-month price-to-earnings (P/E) multiple of 23.02 compared to Applied Materials’ 18.74. This suggests investors are paying a larger premium for LRCX stock, even though its forward earnings growth profile is similar to AMAT.

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Additionally, Lam Research’s business model is more concentrated toward memory markets, making it more vulnerable to cyclical downturns. Applied Materials’ lower multiple, combined with its more diversified revenue base, provides a potentially better balance between growth and valuation for long-term investors.

Year to date, shares of Lam Research and Applied Materials have gained 41.3% and 13.4%, respectively.

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Conclusion: Applied Materials Looks Like the Smarter Bet

Both Lam Research and Applied Materials are set to benefit from the AI-driven semiconductor investment cycle. However, Applied Materials’ diversified product portfolio, stronger resilience across market segments and more attractive valuation make it a better pick at current levels. While Lam offers compelling growth potential, its higher exposure to cyclical memory markets and richer valuation make it the riskier of the two.

Additionally, AMAT carries a Zacks Rank #2 (Buy) and LRCX has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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