2 Reasons to Buy Into Lam’s 185% Rally, 1 Reason to Run Away

Key Points

• Lam Research continues to crush expectations and gain momentum, driven by strong earnings and AI tailwinds.
• Analysts are still hiking their price targets even after a 185% run since April. 
• Despite short-term potential overbought signals, analyst support suggests that the stock could still offer upside. 

Lam Research Corp. NASDAQ: LRCX has undoubtedly been one of 2025’s defining semiconductor stories. The Fremont-headquartered company designs and manufactures wafer-fabrication equipment, an essential component in the chip supply chain—and it seems to have caught the AI-driven wave in demand at just the right time. Its shares hit an all-time high of over $165 on Wednesday, Nov. 5, capping a staggering 185% rally since April.

A mix of surging industry demand, powerful earnings beats, and relentless analyst upgrades has fuelled the rally. But after almost tripling in price since April, investors keen to get involved face a tough choice: is it too late to join the party, or is Lam only getting started? Here are two reasons to consider buying into the rally, and one reason to stay away. 

Bullish Reason #1: Strong Fundamentals

First up is the company’s fundamental performance, which has consistently topped analyst expectations for many quarters in a row. Their Q3 earnings update, from the end of October, continued this track record and left little doubt that the boom in chip spending is real.

Both earnings per share (EPS) and revenue came in comfortably ahead of Wall Street expectations, with management projecting continued growth into the new year.

Demand across the memory and logic segments improved sharply, offsetting weaker sales in China and providing clear evidence that Lam’s diversification strategy is working.

Revenue for the quarter was up more than 27% year-over-year, driven largely by a rebound in memory-equipment demand and an improving product mix.

It was also apparent that Lam is benefiting from structural tailwinds across the semiconductor landscape. Global wafer-fabrication equipment spending is projected to increase through 2026, with capacity expansion in the United States and Europe providing multi-year visibility. As one of the top players in the space, Lam is well-positioned to capture that demand.

Bullish Reason #2: Overwhelming Analyst Support

Unsurprisingly, analysts are overwhelmingly positive on the company’s prospects. This week alone has seen the team at Weiss Ratings reiterate their Buy rating, echoing the moves from DBS Bank, Cantor Fitzgerald and Oppenheimer towards the end of last month. These all came in the aftermath of the report, and notwithstanding the eye-watering rally that shares of Lam have already logged this year, some of these more recent price targets are still calling for gains of up to 25% from where the stock closed on Thursday.

There now seems to be a clear consensus among analysts that Lam’s rally is grounded in improving fundamentals rather than short-term hype, even if the stock is benefiting from the latter just as much.

The stock has been gathering Buy, or equivalent, ratings from multiple firms throughout the year, and many now view Lam as one of the cleanest ways to play the AI infrastructure buildout. 

Heading into the final few weeks of the year, this is exactly the kind of institutional support investors should be looking for if they’re considering getting involved for the first time now.

Even with the 185% run-up since April, it could still be argued that the stock is undervalued relative to its growth potential. Its price-to-earnings ratio, currently around 35, is still at the same level it was more than a year ago, despite consistent record revenue prints each quarter since. While it can be tough to buy into a stock at record highs after so many gains, that kind of valuation narrative offers a considerable degree of comfort.

1 Reason to Stay Away

Still, there’s a legitimate concern that the stock has gone too high, too fast. After nearly tripling in less than eight months, technical readings suggest Lam may be nearing exhaustion. For much of last month, the stock’s relative strength index (RSI) was well above 80, indicating extremely overbought conditions. It has cooled considerably since then and is currently sitting at a fairly healthy 64.

Still, more days of unchecked gains could see it tip into the red zone again, and that’s a concern. It doesn’t help that many tech stocks, and the broader market, are starting to look like it could be time for a correction. However, with the fundamental story so strong and the outlook so bright, any pullback in Lam shares should be seen as a solid entry opportunity, as the potential here is real.