Lam Research Stock Plummets: What Triggered the Bloodbath?

Semiconductor giant Lam Research got bulldozed in today's trading session—here's why Wall Street hit the sell button.

Earnings Miss or Macro Meltdown?

No specifics from the original data, but when a tech bellwether stumbles, it's either a company-specific whiff or sector-wide jitters. Given the chip industry's razor-thin margins, even a slight guidance revision can spark panic.

Short-Term Pain, Long-Term Play?

Semis remain the backbone of AI and IoT—so is this a buying opportunity or the start of a valuation reset? Analysts are torn, but traders clearly voted with their portfolios today.

Bonus Finance Jab: Another 'correction' for the buy-and-hold crowd. Maybe diversify beyond your cousin's hot stock tip next time?

Image source: Getty Images.

Applied Materials' big warning for semiconductor investors

Applied Materials reported strong earnings for its third quarter fiscal 2025 last night. Analysts expected Applied to earn only $2.36 per share on sales of $7.2 billion, but Applied said it actually earned $2.48 per share, and sales were stronger than expected at $7.3 billion.

So far, so good. But Applied Materials then proceeded to tell investors what it expects to do in Q4 of this year -- and that's where things fell apart.

Is it time to sell Lam Research?

Citing a "dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the NEAR term," Applied Materials warned that Q4 profits will be only about $2.11 per share, down sequentially, and well below Wall Street analyst forecasts for $2.38 per share.

Of particular note, Applied warned that Q4 revenue will decline due to "digestion of capacity in China" (i.e., China has already bought a lot of semiconductor manufacturing equipment) and "non-linear demand from leading-edge customers given market concentration and fab timing" (i.e., China's not the only buyer that's already bought a lot of equipment). As a result, Applied Materials is warning that sales that grew to $7.3 billion in Q3 will probably shrink to $6.7 billion in Q4.

That's about 8% worse than Wall Street was expecting. Investors are now worried that the same thing might happen to Lam's stock. Seeing as though, at 26 times earnings, Lam stock is already not cheap, it might be time to sell.