Micron vs. Lam Research: Which Semiconductor Stock Is a Better Buy?

Micron Technology MU and Lam Research LRCX are both big names in the semiconductor industry, but they operate in very different areas. Micron focuses on making memory chips like DRAM and NAND, while Lam Research supplies the advanced machines used to build chips, especially for newer technologies that power artificial intelligence (AI) and high-performance computing.Both companies are benefiting from the rise of AI, but their business models, risk profiles and long-term outlooks differ. Let’s break down how each company is performing and which one looks like the better investment right now.Micron: Strong AI Demand, but Margins StruggleMicron is riding a powerful wave of demand for high-bandwidth memory (HBM) and DRAM products, especially as AI workloads surge. In the last reported financial results for the second quarter of fiscal 2025, its revenues and non-GAAP EPS surged 38% and 271%, respectively, year over year, mainly driven by robust demand for HBM products.Micron Technology, Inc. Price, Consensus and EPS Surprise Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. QuoteMicron has made significant strides in AI-optimized memory solutions, with its HBM3E products gaining attention for their superior power efficiency and bandwidth. In January 2025, NVIDIA revealed that Micron is a key supplier for its GeForce RTX 50 Blackwell GPUs, solidifying Micron’s positioning in the HBM market.Earlier this year, Micron revealed plans for a new HBM advanced packaging facility in Singapore, set to begin operations in 2026, with further expansions by 2027. This move aligns with Micron’s AI-driven growth strategy, ensuring diversified supply chains and increased packaging capacity for high-performance memory chips.Despite Micron's efforts to capitalize on rising AI-related demand, margin pressures and pricing challenges raise red flags. While Micron’s top-line growth in the second quarter of fiscal 2025 was impressive, its profitability came under significant pressure. The company’s non-GAAP gross margin declined to 37.9%, down from 39.5% in the previous quarter, marking a sharp sequential fall. This deterioration was driven by weaker NAND flash pricing and ongoing startup costs at its new DRAM production facility in Idaho.More concerning is the company’s margin outlook. For the third quarter, Micron guided for a gross margin of 36.5% at the midpoint, signaling further compression. A soft margin outlook, despite record sales in its HBM segment, indicates that margin pressures are likely to persist.Lam Research: Focused Execution and Rising MarginsLam Research is also capitalizing on the same AI trends but from the equipment side. It builds the tools chipmakers need to manufacture next-generation semiconductors, including HBM 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 further growth opportunities for LRCX’s cutting-edge fabrication solutions.These trends are aiding Lam Research’s financial performance. In the third quarter of fiscal 2025, the company reported revenues of $4.72 billion, up 24.5% year over year, and non-GAAP EPS of $1.04, highlighting a 33.3% increase (adjusting for stock split).Lam Research Corporation Price, Consensus and EPS Surprise Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation QuoteThe most impressive was Lam Research’s margin performance. The non-GAAP gross margin expanded 150 basis points sequentially to 49% in the third quarter, and the company’s guidance of 49.5% in the fourth quarter reflects further expansion.Similarly, the non-GAAP operating margin improved 210 basis points to 32.8%, and the fourth-quarter guidance indicates a further expansion of 70 basis points sequentially. Lam Research’s improving margins indicate that the company continues to manage supply-chain risks effectively, even amid geopolitical tensions and new tariff threats.MU vs. LRCX: Price Performance and ValuationYear to date, shares of Micron and Lam Research have risen 25.1% and 17.4%, respectively.Image Source: Zacks Investment ResearchOn the valuation front, MU is trading at a forward sales multiple of 2.72X, way below LRCX’s 5.88X.Image Source: Zacks Investment ResearchLam Research does seem pricey compared to Micron. However, LRCX’s valuations also reflect higher profitability and margin stability. Lam Research’s gross margins are more than 10 percentage points higher than Micron’s. Also, LRCX is not as exposed to the volatile swings in DRAM and NAND pricing that affect memory suppliers like MU.Conclusion: LRCX Edges Ahead as the Better BuyBoth Micron and Lam Research are tapping into AI-driven growth, but LRCX has the edge. While Micron is showing impressive top-line growth, its margins are being squeezed by pricing issues and heavy capital spending. Meanwhile, Lam Research is growing steadily, expanding margins and gaining share in high-value equipment markets.In an industry known for its cyclicality, LRCX offers more consistent performance and greater visibility, making it a more compelling investment right now.Currently, Lam Research has a Zacks Rank #2 (Buy), making the stock a must-pick compared to Micron, which has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Micron Technology, Inc. (MU): Free Stock Analysis Report Lam Research Corporation (LRCX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks