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Advanced Memory Technology: The Hidden Beneficiary of Increased AI Spending


Lam Research: An Overlooked AI Chip Play

Analyst Brian Chin of Stifel believes that advanced memory technology could be an underestimated beneficiary of the increased investment in artificial intelligence (AI). In light of this, Chin has upgraded his rating for Lam Research (LRCX) from Hold to Buy. He has also raised his price target for the memory chip equipment maker to $725, up from $505.

Chin highlights the significance of high bandwidth memory (HBM) as an under-appreciated component of AI acceleration. He sees Lam Research as the primary beneficiary of HBM-driven DRAM (memory chip) growth in the near and long term.

As a result of this positive outlook, Lam shares experienced a 2.6% increase in afternoon trading on Monday, reaching $639.70.

Generative AI: A Source of Excitement

Generative AI has gained substantial attention this year, particularly due to OpenAI’s release of ChatGPT. This technology utilizes a brute-force approach to generate content by digesting text, images, and videos. The growing interest in generative AI has fueled the expansion of Lam’s chip equipment.

The Role of Lam Research in Advanced Memory Semiconductors

Lam Research’s chip equipment is instrumental in the production of advanced HBM memory semiconductors. Given that HBM is essential for AI applications and AI chips, Chin asserts that Lam will directly benefit from the increasing demand for generative AI.

He explains that as transistor density and FLOPS (floating point operations per second) increase in the field of AI, memory becomes a bottleneck. Thus, the expansion of generative AI will accelerate the growth of HBM.

Over the past year, Lam shares have experienced a significant rise of approximately 37%. In comparison, the iShares Semiconductor ETF (SOXX), which tracks the performance of the ICE Semiconductor Index, has seen a 31% increase during the same period.

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