LRCX vs. ACMR: Which Semiconductor Equipment Stock is the Better Buy?

Core Viewpoint - The semiconductor manufacturing supply chain is experiencing growth driven by AI and high-performance computing demand, benefiting companies like Lam Research and ACM Research, which operate at different scales and strategic exposures [1] Lam Research (LRCX) - Lam Research is a mature leader in chip equipment, particularly in etch and deposition technology, crucial for high-bandwidth memory and advanced packaging for AI workloads [2] - In 2024, Lam Research's shipments for gate-all-around nodes and advanced packaging surpassed $1 billion, with expectations to triple to over $3 billion by 2025 [3] - For Q2 fiscal 2025, Lam Research reported revenues of $4.38 billion, a 16.4% year-over-year increase, and EPS of 91 cents, reflecting a 21% increase [4] - The company faces challenges from U.S.-China trade tensions, with China accounting for 31% of Q2 fiscal 2025 revenues, down from 37% in the previous quarter, and $700 million in expected sales from restricted Chinese customers not materializing in 2025 [5] - Declining demand for mature-node semiconductor equipment is impacting Lam Research's foundry business, with foundry revenues decreasing from 41% to 35% of system sales [6] ACM Research (ACMR) - ACM Research is a smaller semiconductor equipment provider focused on advanced cleaning, plating, and thermal processing tools, with over 99% of its 2024 revenues coming from China [7] - The company estimates its Serviceable Available Market to be approximately $18 billion, indicating significant long-term growth potential [8] - ACM Research has achieved a CAGR of 54.6% over the past seven years, with 2024 revenues increasing by 40% year-over-year and non-GAAP EPS rising by 38.7% [9] - The company is highly dependent on China, making it vulnerable to geopolitical shifts and changes in China's chip investment strategy [10] - ACM Research is reinvesting in R&D to expand its technology suite beyond cleaning and plating, which could enhance its growth rate if successful [11] Stock Performance and Valuation - ACM Research shares have returned 22% year-to-date, while Lam Research shares have declined by 8% [12] - ACM Research is trading at a forward earnings multiple of 8.20X, significantly below its three-year median of 17.74X, while Lam Research's forward earnings multiple is at 17.55X, lower than its median of 20.77X [13] - Analysts are more optimistic about ACM Research, with EPS estimates for 2025 revised upward by 19.4%, compared to a mere 1% increase for Lam Research [15] Conclusion - ACM Research appears to be a more compelling investment option due to its rapid revenue growth, increasing market share in China, attractive valuation, and favorable estimate revisions [18]