Lam Research LRCX and ACM Research ACMR are both deeply embedded in the semiconductor manufacturing supply chain, but they operate at very different scales and strategic exposures. The global chip industry reaccelerates due to artificial intelligence (AI) and high-performance computing demand, which will aid the prospects of these equipment providers.

However, while Lam Research is a mature powerhouse, ACM Research is a fast-growing upstart capitalizing on China’s semiconductor boom. So, the question arises: Which stock offers better value and long-term growth potential today?

The Case for Lam Research Stock

Lam Research has long been a pillar of the chip equipment world, especially in etch and deposition technology, which are critical for producing high-bandwidth memory (HBM) and advanced packaging technologies essential for AI workloads. These leading-edge technologies are helping it capitalize on the opportunities from the booming demand for AI and datacenter chips, which require advanced fabrication technologies.

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 by 2025. Additionally, the industry’s migration to backside power distribution and dry-resist processing presents further growth opportunities for Lam Research’s cutting-edge fabrication solutions.

These trends are aiding Lam Research’s financial performance. In the second quarter of fiscal 2025, the company reported revenues of $4.38 billion, up 16.4% year over year, and earnings per share (EPS) of 91 cents, highlighting a 21% increase (adjusting for stock split). The Zacks Consensus Estimate for fiscal 2025 signals continued stability in its core business. The consensus mark for revenues and EPS indicates year-over-year growth of 18.8% and 24.8%, respectively.

Nonetheless, Lam Research is not immune to risks. U.S.-China trade tensions pose a significant challenge. China accounted for 31% of its second-quarter fiscal 2025 revenues, down from 37% in the prior quarter. During the last reported quarter earnings call, the company revealed that $700 million in expected sales from restricted Chinese customers will not materialize in 2025, creating a noticeable sales gap.

Additionally, declining demand for mature-node semiconductor equipment is weighing on Lam Research’s foundry business. Foundry revenues fell from 41% of system sales in the first quarter to 35% in the second quarter, reflecting weaker demand. With TSMC and other foundries slowing their mature-node spending, Lam Research’s growth in this segment could remain sluggish.

The Case for ACM Research Stock

ACM Research is a relatively smaller semiconductor equipment provider specializing in offering advanced cleaning, plating and thermal processing tools. Unlike LRCX, which serves a global client base, ACMR is heavily concentrated in China, both in terms of customers and operations. China accounted for more than 99% of the company’s 2024 total revenues.

Nonetheless, ACM Research’s diverse product offerings across the aforementioned areas target a substantial global semiconductor market, with ACMR estimating its Serviceable Available Market to be approximately $18 billion. This demonstrates the robust long-term growth opportunities available for the company.

Over the past seven years, ACM Research has grown at a breakneck pace, with revenues increasing at a CAGR of 54.6% during the period. Full-year 2024 revenues surged 40% year over year, while non-GAAP EPS rose 38.7%, driven by the rising adoption of its single-wafer cleaning systems and expanding customer orders from Chinese foundries. The Zacks Consensus Estimate for 2025 signals continued growth momentum, with revenues expected to rise 18.7% year over year.

ACM Research’s overdependence on China makes the company highly vulnerable to geopolitical shifts, funding freezes or changes in China’s chip investment strategy. With a limited presence outside China, ACMR lacks the global customer diversity that could buffer against regional slowdowns.

Still, ACM Research’s growth is hard to ignore. The company is also aggressively reinvesting in research and development with an aim to broaden its technology suite beyond cleaning and plating. If successful in gaining traction outside of China, ACMR’s growth rate will accelerate further.

Stock Price Performance and Valuation of LRCX and ACMR

Despite broader market headwinds, ACM Research shares have returned 22% in the year-to-date period. On the contrary, shares of Lam Research have fallen 8% over the same time frame.

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From a valuation standpoint, ACM Research looks more attractive than Lam Research. ACMR is trading at a forward earnings multiple of 8.20X, way below its median of 17.74X, over the past three years. LRCX’s forward earnings multiple sits at 17.55x, lower than its median of 20.77x over the past three years. Though both stocks are trading below their respective three-year median, ACMR has more upside potential left than LRCX.

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Analysts More Optimistic About ACMR Prospects

Although EPS estimates for both companies have been trending northward over the past 60 days, analysts seem to be more optimistic about ACM Research’s prospects. The Zacks Consensus Estimate for ACMR’s 2025 earnings has been revised upward by 19.4%. On the contrary, EPS estimates for LRCX’s fiscal 2025 have been raised by a mere 1% over the past 60 days.

ACMR EPS Estimate Revision

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04_LRCX EPS Estimate Revision

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Conclusion: ACMR Stock More Compelling Buy

Both Lam Research and ACM Research are well-positioned within the semiconductor capital equipment space. However, ACMR seems to be a more compelling buy option given its rapidly growing revenues and increasing share in the Chinese market. Additionally, ACM Research’s attractive valuation and more favorable estimate revisions make it a better investment choice in the current market environment.

While ACMR sports a Zacks Rank #1 (Strong Buy) at present, LRCX carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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