Morgan Stanley optimistic about Lam Research (LRCX.US) becoming the big winner in the GAA era as TSMC hits new highs

According to Golden Ten Data APP, at the beginning of U.S. trading on Monday, TSMC (TSM.US) shares reached a record high, with its total market capitalization approaching $2.5 trillion, as market optimism surrounding advanced process technologies and AI chip demand continues to heat up. However, upstream equipment leader Lam Research (LRCX.US) fell by 1%. In its latest research report, Morgan Stanley pointed out that with TSMC accelerating advancement in 2nm and other gate-all-around (GAA) nodes, Lam Research will become one of the main beneficiaries. The bank reiterated its “Overweight” rating and raised its target price from $367 to $385.

December Quarter Results Expected to Beat Expectations

Morgan Stanley expects Lam Research’s quarter ending in December to be strong, with revenue likely to reach $9 billion, above the market consensus of $8.5 billion, with risks skewed to the upside. The bank believes the semiconductor equipment industry has overcome demand (cleanroom) and supply chain constraints, and forecasts wafer fab equipment (WFE) annualized run rate for the December quarter will exceed $200 billion, a 60% year-over-year increase. Lam Research is expected to be the fastest-growing equipment provider for the third consecutive year. Due to unprecedented early procurement for DRAM and 2nm logic process technology, as well as the company’s execution ability, it is possible that its December quarter revenue guidance may exceed $9 billion.

GAA Era Big Winner: Logic Market Share Continues to Increase

The report pointed out that Lam Research will see about a 300 basis point increase in logic market share in 2025, and is projected to add another 80 basis points in 2026. Previously, the market had doubts about the sustainability of the company’s logic market share gains, since part of the 2025 growth is driven by the Chinese market. However, Morgan Stanley now believes Lam Research’s share in the leading logic market will continue to grow.

In detail, TSMC’s 2nm process is a key node for Lam Research to increase its market share in the GAA era. Morgan Stanley estimates that Lam Research’s share will rise about 200 basis points from 3nm to 2nm. Its WFE expenditure per 2nm wafer is about 50% higher than that of 3nm, while the overall WFE per wafer expenditure increases about 30%. Additionally, Lam Research’s share of TSMC’s capital expenditures is expected to rise about 10 basis points from fiscal 2025 to fiscal 2026, and by a more significant 130 basis points by 2027.

Morgan Stanley estimates Lam Research’s logic market share will reach 11.8% in 2026, close to its overall WFE share of 12.3%, reflecting the company’s product portfolio transition from a focus on NAND to more diversified end markets.