‘Logic’ Tells Me to Buy Lam Research, but Not Yet
LRCX will be a good stock to buy and maybe soon, but not this morning. Here’s how I’d approach this tech winner.
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We all know that the semiconductors had a rough week going into the 250th anniversary of our nation’s independence. The Philadelphia Semiconductor Index gave up 9.43% last week, while the Dow Jones U.S. Semiconductor Index surrendered 6.31%. The semiconductor equipment providers were not immune. For the week, Lam Research gave back 7.3%, and KLA Corp (KLAC) lost 5.3%, while Applied Materials surrendered 3.8%. For KLAC, the period was “good” for a second consecutive red weekly candlestick. Applied Materials, meanwhile, had been revealed as a current Michael Burry short position. Burry also revealed that he was short the iShares Semiconductor ETF (SOXX).
Then Someone Said ‘No’
On Monday morning, analyst Shane Brett of Morgan Stanley, made a number of changes. Brett reiterated an “overweight” rating on Lam Research (LRCX), which is considered to be a buy-equivalent rating; he also increased his target price on LRCX to $04 from $331. The stock closed on Thursday at $351.41.
Additionally, Brett reiterated his “equal eight” or hold-equivalent rating on both KLA Corp and Applied Materials. He increased his target price for KLAC, however, from $190 to $274 and his target price for AMAT from $502 to $647. That was with the last sales for those names at $235.55 and $603.04, respectively. Brett also names AMAT as a “top pick” for the sector. Just in case readers are wondering, Brett is a highly respected sell-side analyst. He is rated at five stars out of five by TipRanks, has an 81% success rate over two years, and over that time frame can boast an average return of 81%.
In the accompanying note, Brett points out that stronger demand for memory and logic will be a driver, fueled by capital spending and the ongoing AI infrastructure buildout. Brett added roughly $5 billion to his 2026 DRAM (Dynamic Random Access Memory) forecast and about $2 billion to 2026 NAND, also known as flash memory, forecast. He also sees bigger upside for both in 2027, where he is adding roughly $9 billion each to both forecasts.
“The market is entering the phase of the cycle where [semiconductor process equipment] returns begin to rival those of memory stocks,” Brett is quoted as writing.
Technically Speaking…
All three names are entering the new week sitting about two-thirds of the way into a head & shoulders pattern of bearish reversal, which indicates that more trouble could be ahead. I do have some fondness for a couple of these names. Way before I became known for my very fortunate bullish calls on Palantir Technologies (PLTR) and Advanced Micro Devices (AMD) when those stocks were trading at very low prices, I had made both Lam Research and KLA Corp my stocks of the year for different years. The LRCX call went about as well as the calls you probably do remember. The KLAC call, not as much. It was, indeed, a profitable call, but there was nothing parabolic about it.
Not because I made that call back in the old days, but because I have traded the name well over the years, I am drawn among these names to LRCX, so I’m taking a look there. You go your own way if you have had better luck with one of the other names.
Readers will see that LRCX had a very nice run, more than tripled in price from autumn 2025 into mid-June 2026. The shares tried to break above the upper trendline of my Raff Regression model in June and failed, ultimately losing their 21-day exponential moving average and perhaps the swing crowd, in the process.
I think that LRCX will be a good stock to buy and maybe soon, but not this morning. Should the shares recapture the 21-day exponential moving average, they would then likely experience an algorithmic surge and be able to build that missing right shoulder. This would be a trade-able event. However, it might not last.
I do expect the 50-day simple moving average (blue line) to rise a little more from here and then come under fire from above. Traders can trade and I might. For investors, and I am one of those, too, I believe that the spot to get involved could come just above the 50-day SMA. For now, $325 July 24 puts are valued close to $14. If one can make that sale, that might be where the exposure is worth the risk. Just thinking for now.
At the time of publication, Guilfoyle was long AMD equity.
