The semiconductor industry is on the rebound this year, driven by growing demand for chips for a variety of applications including smartphones, personal computers (PCs) and data centers. But there is one niche within the industry that is enjoying a bigger boost than the broader semiconductor market.
The Semiconductor Industry Association expects the global semiconductor market to grow 16% in revenue this year. However, the memory chip market is expected to grow much faster than the semiconductor market. Market research firm Gartner expects memory spending to increase 66% this year.
Micron Technology has benefited greatly from this increase in memory sales, as is the case as evidenced by its latest quarterly resultsShares of the memory specialist are up 54% in 2024, and a potential acceleration in its growth could help it soar further. However, there’s another memory stock that’s up a healthy 42% so far this year and could get a nice boost when it reports quarterly results later this month — Lam Search (NASDAQ: LRCX).
Let’s see why.
Artificial intelligence increases demand for memory
In its most recent earnings call, Micron Technology management highlighted that demand for memory deployed in artificial intelligence (AI) The chips, called high-bandwidth memory (HBM), are booming. Specifically, Micron management has noted that its HBM capacity “is sold out for calendar years 2024 and 2025, with prices already contracted for the vast majority of our 2025s.”
The chipmaker expects its HBM revenue to grow from “several hundred million dollars” in fiscal 2024 to “several billion dollars” in fiscal 2025. Such strong demand for HBM is why memory makers like Micron are looking to expand their production capacity. For example, Micron rival SK Hynix has ordered a new fab to meet the surge in demand for HBM.
Hynix expects its HBM production capacity to more than double in 2024, and a similar scenario is expected to play out at Samsung. Additionally, Samsung plans to double its HBM production capacity again in 2025. All of this bodes well for Lam Research, which derives most of its revenue from selling memory manufacturing equipment.
Specifically, 44% of Lam’s revenue comes from memory equipment sales. So the strong demand for memory chips should ideally translate into an increase in Lam’s business. That’s why the company is expected to report year-over-year growth when it releases its quarterly results this month.
Lam Research’s return to growth could translate into further upside
Lam Research forecasts revenue of $3.8 billion for the quarter ending June 30, which is also the final quarter of fiscal 2024. That would translate to 19% year-over-year growth. By comparison, Lam’s revenue for the first nine months of fiscal 2024 fell 22% year-over-year to $11 billion. The company has struggled…
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