Keybanc bearish on Lam Reaserch, positive on Applied Material

Investing.com -- KeyBanc analysts cut their rating on Lam Research and turned more positive on Applied Materials, saying the sharp run-up in Lam’s shares has outpaced its near-term earnings potential while Applied offers a cheaper entry into the same industry tailwinds.

The analysts downgraded Lam to Sector weight after a rally driven by optimism over the memory recovery and AI-fueled spending.

Keybanc said valuations had stretched, with Lam trading well above its historical averages even though tool demand from memory makers could take time to catch up with stronger chip pricing.

“Even if we assume 10% upside to current consensus estimates, LRCX is trading at 23x and 20x those forward FY27-28 numbers vs. its normal high-teen average P/E,” analysts said.

Applied Materials, meanwhile, has lagged peers this year as investors focused on its exposure to mature chipmaking in China and uneven demand at the cutting edge. KeyBanc said those worries have already been reflected in the stock.

“We see a more favorable set up for AMAT which, in our view, is trading at a more reasonable valuation,” the analysts said, raising their price target to $220.

The firm kept its long-term view of the sector intact, citing rising capital intensity from AI-driven demand, new transistor designs at the 2nm node expected in 2026, and the buildout of advanced packaging such as 3D chip stacking.

It also flagged the NAND memory upgrade cycle and adoption of high-bandwidth memory as key drivers for equipment spending.

Despite those trends, the analysts said stock selection matters after a strong rally in semiconductor equipment names.

“Positive sentiment could drive shares higher, but risk/reward dynamics keep us from pushing our price target” on Lam, according to Keybanc.

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