LRCX vs. TSM: Which Semiconductor Powerhouse Is the Better Buy?

Core Insights - Lam Research Corporation (LRCX) and Taiwan Semiconductor Manufacturing Company (TSMC) are pivotal in the global semiconductor supply chain, with TSMC being the largest contract chipmaker and Lam Research providing essential equipment for chip production [1][2] Group 1: Lam Research Performance - Lam Research is leveraging AI trends by producing tools necessary for manufacturing next-generation semiconductors, which are crucial for AI and cloud data centers [3][4] - 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 in 2025 [5] - The company has maintained quarterly revenues exceeding $5 billion for two consecutive quarters, driven by strong demand from major chipmakers [6] - In Q1 fiscal 2026, Lam Research reported revenues of $5.32 billion, a 28% year-over-year increase, with non-GAAP EPS of $1.26, reflecting a 46.5% rise [7] Group 2: Taiwan Semiconductor Performance - Taiwan Semiconductor remains a leader in the global chip foundry market, with revenues in Q3 2025 increasing by 41% year-over-year to $33.1 billion and EPS rising 39% to $2.92 [8] - AI-related chip sales are projected to contribute approximately 30% of total revenues in 2025, up from the mid-teens percentage in 2024, with expected annual growth of 40% over the next five years [9] - TSMC plans to invest between $40 billion and $42 billion in capital expenditures in 2025, significantly higher than the $29.8 billion in 2024, focusing on advanced manufacturing processes [11] Group 3: Comparative Analysis - Lam Research shows a more stable earnings growth profile, with projected year-over-year increases of 15.7% and 15.5% for fiscal 2026 and 2027, respectively, while TSMC's EPS growth is expected to slow down [14] - Over the past year, shares of Lam Research have surged by 163.2%, compared to 54.2% for Taiwan Semiconductor [21] - Lam Research trades at 39.19 times forward earnings, while TSMC trades at 26.02 times, with the premium for LRCX justified by its positive earnings momentum [22] Conclusion - Lam Research is currently viewed as the better investment option due to its strong demand, steady growth, and fewer risks compared to Taiwan Semiconductor, which faces challenges from geopolitical tensions and higher capital spending [25][26]