The semiconductor sector has witnessed a remarkable surge in 2026, with the PHLX Semiconductor Sector index experiencing a notable 12.5% increase. Among the companies leading this impressive rally are Micron Technology and Sandisk, which have recorded significant gains of 47% and a staggering 193%, respectively. This growth has been largely fueled by robust demand for memory chips utilized in artificial intelligence (AI) data centers and edge devices such as smartphones and personal computers.
While Micron and Sandisk are making headlines, Lam Research has emerged as a standout performer, outperforming the broader industry. The company’s stellar growth can be attributed to its integral role in the memory chip sector. Lam Research provides wafer fabrication equipment (WFE) to foundries and chipmakers worldwide, generating approximately 59% of its revenue from foundry equipment used for manufacturing chips designed by industry giants like Nvidia and Qualcomm. However, a significant portion, over one-third, of its revenue comes from memory manufacturing equipment.
The memory equipment provided by Lam Research is crucial for producing dynamic random access memory (DRAM) and NAND flash memory. Both Micron and Sandisk are major players in these categories, and they have highlighted a persistent supply shortage that has not been able to meet the soaring demand for memory chips. Micron, for example, has reported that it sold out its capacity for high-bandwidth memory (HBM) chips necessary for AI applications even before the year commenced. This has prompted the company to forecast a 45% increase in its capital expenditures for the current fiscal year, potentially reaching $20 billion, with expectations that the shortage could extend through 2028.
Similarly, during a recent earnings call, Sandisk emphasized that demand for NAND flash storage products is currently outstripping supply. As both companies strive to address this gap in the market, Lam Research stands to gain significantly. In the second quarter of fiscal 2026, Lam’s revenue surged by 22% year over year, reaching $5.34 billion.
The positive momentum is reflected in Lam’s financial performance, with non-GAAP adjusted earnings climbing nearly 40% year over year to $1.27 per share. With an optimistic outlook, Lam anticipates continued growth that may allow its stock to maintain its strong performance. In 2026 alone, Lam’s shares appreciated by 34%, and future guidance indicates that this rally may be sustainable. The company forecasts a 21% year-over-year revenue increase for the current quarter, alongside a projected 30% rise in adjusted earnings.
Furthermore, the ongoing memory shortage is not expected to diminish within the coming years. In an earnings call in January, Lam’s management highlighted expectations that 2026 wafer fabrication equipment spending will reach $135 billion, marking a 23% increase from the previous year. Additionally, the ongoing supply constraints across the semiconductor industry may lead to even higher spending, favoring stronger growth trajectories for Lam Research.
Given these factors, Lam Research appears well-positioned for continued success, potentially paving the way for further upside following its impressive start to 2026.
