What Happened?

Shares of semiconductor equipment maker Lam Research (NASDAQ: LRCX) fell 4.5% in the afternoon session after Morgan Stanley downgraded the stock to 'Underweight' from 'Equal-Weight', citing concerns over a future slowdown in growth. 

The investment bank also lowered its price target on the shares to $92 from $94. Morgan Stanley's pessimism stems from expectations that Lam Research's key growth drivers in China and the NAND memory markets will slow significantly after a strong performance in 2024 and 2025. The firm projects that the company's system shipment growth will decelerate dramatically, from an estimated 82% in 2025 to just 3% in 2026. This analyst action added to broader negativity across the semiconductor sector, which experienced a wider selloff, further pressuring Lam Research's stock.

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What Is The Market Telling Us

Lam Research’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 4 days ago when the stock dropped 4.3% on the news that the U.S. government tightened restrictions on the use of American semiconductor manufacturing equipment in China. The U.S. Commerce Department revoked authorizations that had allowed chipmakers Samsung and SK Hynix to receive U.S. equipment for their Chinese facilities. Under the new rules, these companies will now need to obtain specific licenses for such purchases. This policy change is expected to reduce sales for American semiconductor equipment makers like Lam Research, KLA Corp, and Applied Materials. The stock's drop also came amid a wider sell-off in the technology sector, as disappointing guidance from other tech firms like Dell and weak data center revenue from Marvell Technology contributed to negative market sentiment.

Lam Research is up 32.7% since the beginning of the year, but at $96.10 per share, it is still trading 10.5% below its 52-week high of $107.38 from August 2025. Investors who bought $1,000 worth of Lam Research’s shares 5 years ago would now be looking at an investment worth $2,650.

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