Is a Semiconductor Equipment Pause Coming?

– Lam put up good numbers but H2 outlook was flat with unknown 2026
– China remains high & exposed at 35% of biz while US is a measly 6%
– Unclear if this is peak, pause, digestion, technology or normal cycle
– Coupled with ASML soft outlook & stock run ups means profit taking

Nice quarter but expected given stock price

Lam reported revenues of $5.17B with gross margins of 50.3% and non-GAAP EPS of $1.33, at the high end and a slight beat.

Outlook for current quarter is $5.2B+-$300M and $1.20+-$0.10.

Lam talked about the second half being flat with the first half and unclear 2026 outlook so far…..somewhat echoing ASML….

China 35%…US 6% of business

China remains the both the biggest customer and the biggest exposure at 35% of business. Korea is a distant second at 22%, Taiwan 19%, Japan 14% and the US a distant, miniscule 6%.

Given that China is outspending the US by a ratio of 6 to 1, we see no way that the US could ever catch up or even come close to China.

This clearly shows that whatever efforts the US government is making to have a semiconductor comeback, its obviously failing to do so.

This remains a large exposure to the current trade issues that are still not settled with China.

This red flag will continue for the near and medium term.

Profit taking given stock run up in the face of slowing outlook & uncertainty

Lam’s stock was off in the aftermarket as well as during the normal session as the good quarter doesn’t out weigh the soft outlook and China exposure.

With the amount we have seen the semiconductor equipment stocks run up on the AI tidal wave, it’s clear that the stocks, including Lam, have gotten ahead of themselves and reality.

Although AI is still huge, the rest of the chip industry and equipment specifically doesn’t deserve the run up as non AI related business is just so-so at best.

The stocks

AMAT, KLAC & ASML have a similar profile and will be similarly weak.

We don’t see a change in momentum any time soon and may have an overall flattish outlook coupled with risk associated with trade and global politics which could dampen that flat outlook.

Its important to remember that chip equipment stocks are somewhat disconnected from the likes of NVDA and TSMC as AI continues to do well .

The recent Samsung/Tesla news doesn’t help equipment stocks much and obviously hurts Intel and the outlook for US related chip spend

Taking money off the table in equipment names seems prudent given what we have heard so far……..

About Semiconductor Advisors LLC

Semiconductor Advisors is an RIA (a Registered Investment Advisor),
specializing in technology companies with particular emphasis on semiconductor and semiconductor equipment companies.

We have been covering the space longer and been involved with more transactions than any other financial professional in the space.

We provide research, consulting and advisory services on strategic and financial matters to both industry participants as well as investors.
We offer expert, intelligent, balanced research and advice. Our opinions are very direct and honest and offer an unbiased view as compared to other sources.

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