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

Core Insights - Micron Technology and Lam Research are both significant players in the semiconductor industry, focusing on different segments: Micron on memory chips and Lam on manufacturing equipment [1][2] - Both companies are benefiting from the rise of AI, but their business models and long-term outlooks differ [2] Micron Technology - Micron is experiencing strong demand for high-bandwidth memory (HBM) and DRAM products, with revenues and non-GAAP EPS increasing by 38% and 271% year over year in Q2 fiscal 2025 [3] - The company has introduced AI-optimized memory solutions, with its HBM3E products noted for their power efficiency and bandwidth [4] - Micron plans to open a new HBM advanced packaging facility in Singapore by 2026, aligning with its AI-driven growth strategy [5] - Despite strong sales, Micron faces margin pressures, with non-GAAP gross margin declining to 37.9% from 39.5% in the previous quarter due to weaker NAND pricing and startup costs [6] - The company anticipates further margin compression, guiding for a gross margin of 36.5% in Q3 [7] Lam Research - Lam Research is capitalizing on AI trends by providing essential tools for semiconductor manufacturing, including those for HBM and advanced packaging [8] - The company reported shipments exceeding $1 billion for gate-all-around nodes and advanced packaging in 2024, with expectations to triple this figure in 2025 [10] - Lam Research's non-GAAP gross margin improved by 150 basis points to 49% in Q3 fiscal 2025, with guidance indicating further expansion [12] - The non-GAAP operating margin also improved by 210 basis points to 32.8%, reflecting effective supply-chain management [13] Comparative Performance - Year-to-date, Micron's shares have risen by 25.1%, while Lam Research's shares have increased by 17.4% [14] - Micron trades at a forward sales multiple of 2.72X, significantly lower than Lam Research's 5.88X, reflecting differing profitability and margin stability [15][16] - Lam Research's gross margins exceed Micron's by more than 10 percentage points, indicating less exposure to volatile memory pricing [19] Conclusion - While both companies are leveraging AI-driven growth, Lam Research is positioned as the better investment due to expanding margins and consistent performance amid pricing pressures faced by Micron [20][21]