LRCX Outperformed in 2025, but Valuation and Options Activity Flag 2026 Risks

Core Viewpoint - Lam Research (LRCX) stock is facing potential challenges in 2026 after a strong performance in 2025, with concerns about stretched valuations and future earnings growth [1][4][5]. Group 1: 2025 Performance - Lam Research was one of the strongest semiconductor performers in 2025, driven by AI-driven wafer-fab equipment demand, record foundry revenue, and margin expansion [2][3]. - LRCX shares experienced significant gains, rising approximately 145% since January 2025, reaching record highs [3]. Group 2: 2026 Outlook - The forward price-earnings (P/E) ratio for LRCX is currently at 35.93x, which is above its 3- and 5-year averages, indicating potential overvaluation [4]. - The price-to-sales ratio stands at 11.56x, also at a premium compared to historical norms, suggesting overly bullish expectations [4]. - A price/earnings-to-growth (PEG) ratio of 2.04x indicates that investors are paying a high multiple relative to projected earnings growth [4]. Group 3: Risks and Concerns - There are concerns that spending from Lam's memory and foundry customers may slow down following aggressive capacity additions in 2025 [5]. - Export control uncertainties related to China-linked revenue continue to pose risks to future earnings [5]. - The current risk-reward profile for LRCX investors appears less favorable compared to earlier in the investment cycle [6].