Morgan Stanley Downgrades Lam Research Amid Slowing Shipment Growth

What's Happening?

Morgan Stanley has downgraded Lam Research to 'Underweight' from 'Equal Weight', reducing its price target to $92 from $94. This decision follows a 7.3% drop in Lam Research's stock in August 2025. The downgrade is based on anticipated slowing shipment growth, projected to decrease from 82% in 2025 to 3% in 2026. This slowdown is attributed to U.S. export restrictions and corrections in NAND memory demand. Despite these concerns, some analysts argue that Lam Research's 34% year-over-year revenue growth and 50.3% non-GAAP gross margins suggest the company is undervalued at 12x 2025 earnings.

Why It's Important?

The downgrade by Morgan Stanley highlights potential challenges for Lam Research, particularly in the semiconductor industry, which is sensitive to export restrictions and market demand fluctuations. The projected slowdown in shipment growth could impact Lam Research's market position and financial performance. However, the company's strong revenue growth and margins indicate resilience, suggesting that the stock might be undervalued. Investors and stakeholders in the semiconductor sector will be closely monitoring these developments, as they could influence investment strategies and market dynamics.

What's Next?

Lam Research may need to navigate the challenges posed by U.S. export restrictions and fluctuating NAND memory demand. The company might explore strategic adjustments to mitigate these risks and capitalize on its strong financial performance. Investors could consider Lam Research as a long-term hold, while hedging against macroeconomic risks with short-term options or sector ETFs. The semiconductor industry may experience shifts in investor sentiment, potentially creating opportunities for value-oriented investors.