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A Semiconductor Leader Poised for AI-Driven Growth Despite Near-Term Headwinds

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The semiconductor industry is at a pivotal juncture, fueled by explosive demand for advanced chips powering artificial intelligence (AI), 5G, and high-performance computing. At the heart of this revolution is Lam Research (LRCX), a leader in semiconductor equipment that stands to benefit from secular tailwinds—even as geopolitical risks cloud near-term visibility. This article examines whether LRCX’s valuation, earnings momentum, and strategic positioning justify a buy rating despite a cautious Zacks Rank.

Valuation: Undervalued PEG Ratio Signals Opportunity

Lam Research’s PEG ratio of 1.24 (as of July 2025) remains below both the semiconductor equipment industry average of 1.55 and the broader Electronics-Semiconductors sector’s average of 1.59. This metric, calculated by dividing the P/E ratio by the 5-year EBITDA growth rate, suggests LRCX is trading at a discount to its growth prospects.

The PEG ratio’s allure lies in its dual consideration of valuation and growth. A ratio under 1.5 typically indicates undervaluation, and LRCX’s 1.24 places it squarely in this category. Even if we use the industry average cited in earlier research (2.09), LRCX’s PEG remains compelling. This discount is puzzling given its dominant market share (15% of global wafer fabrication equipment, or WFE) and its role in critical technologies like atomic layer deposition (ALD), essential for AI chip production.

Earnings Momentum: Positive Revisions Amid Industry Growth

Lam’s earnings revisions tell a story of resilience. Despite macroeconomic headwinds, analysts have raised fiscal 2025 EPS estimates to $4.00, a 5% increase from 2024 levels. This upward momentum aligns with LRCX’s 48% year-over-year (YoY) earnings growth projection for Q2 2025.

The semiconductor equipment sector is a prime beneficiary of AI’s rise. AI chips require advanced nodes (e.g., 3nm and below), demanding cutting-edge equipment like LRCX’s etch and deposition tools. This structural demand, paired with rising WFE spending (expected to hit $130 billion by 2027), positions LRCX for sustained growth.

The Zacks Rank Dilemma: Why Hold Doesn’t Tell the Full Story

Lam Research’s Zacks Rank #4 (Sell) as of July 2025 reflects near-term risks, including:
– Geopolitical tensions: U.S.-China trade disputes could disrupt LRCX’s China revenue (a major market).
– Delayed NAND spending: A slowdown in NAND memory chip investments has dampened short-term demand.

However, the Zacks Rank focuses on 12–24 months of near-term volatility. It underweights long-term catalysts like:
1. AI-driven capex boom: Chipmakers like TSMC and Samsung are ramping up AI-specific foundries, requiring Lam’s tools.
2. Potential China trade thaw: If U.S. sanctions ease, LRCX could regain access to Chinese clients, boosting revenue.

The Rank’s caution is understandable, but investors should separate short-term noise from LRCX’s strong fundamentals:
– Forward P/E of 21.6x, below the semiconductor sector’s 35.3x average.
– ROE of 53%, reflecting operational efficiency.

Catalysts for a Re-Rating: AI and Geopolitical Shifts

The key catalysts to watch for a valuation rebound are:
1. AI Chip Demand: NVIDIA’s $200 billion AI chip roadmap and Google’s quantum computing investments underscore the need for advanced fabrication tools. LRCX’s ALD systems are critical for these chips.
2. Trade Policy Shifts: A potential easing of U.S.-China trade restrictions could unlock $500 million+ in annual revenue for LRCX.
3. Q3 2025 Earnings: Management’s guidance of $1.00 EPS and $4.65 billion in revenue (both above consensus) could surprise positively.

Risks and Conclusion: A Buy for the Next 12 Months

Lam Research isn’t without risks:
– Execution risks: High R&D costs ($1.3 billion annually) could pressure margins.
– Macroeconomic slowdown: A recession could delay chip capex.

However, the long-term case for LRCX is too strong to ignore. Its PEG discount, earnings momentum, and strategic position in AI infrastructure justify a buy rating for the next 12 months. Investors should aim for a target price of $110 (25x forward P/E), with upside if China-related risks abate.

In sum, LRCX’s valuation and growth trajectory make it a compelling play on the AI revolution. While near-term headwinds justify caution, the re-rating potential is undeniable.

Investment thesis: Buy LRCX at current levels, with a 12-month price target of $110.
Risk rating: Moderate (geopolitical and macro risks).
Hold for: 12–18 months for valuation expansion.



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AI Research

Artificial intelligence is a commodity, but understanding is a superpower

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July 9, 2025

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As a developer and a human being, you want to push yourself as much as possible to incorporate the intention of things into your practice. By insisting on understanding a project’s intention and uniting it with your own understanding of the particulars of implementation, you become far more valuable. AI then makes it easier to magnify your intentions into automated activity.

We can speculate that AI will get better at this middle ground in the future, but it will never actually have intention. It will only ever move under human direction. Resist becoming just a connector or interpreter of intention to implementation. Keep on working to develop and contribute your own unique understanding. Implementation can be automated, but the unique qualities of understanding cannot.

Why LLMs will not replace higher-level languages

If you follow the hype cycle, it might seem that AI’s ability to mass produce code to meet requirements makes understanding the intention of that code less important. I’d say it makes it less necessary up front. There may even come a time when AI’s natural language interface is something like what fourth-generation languages are today. I can see a possible future where languages like JavaScript and Python are a layer below the AI interface, akin to how C is today. But if that is the analogy we’re using, then it seems clear we will always need people who deeply understand that layer, just as today we still need people who understand C, assembly machine code, and chip wafers.



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LG AI Research Institute has released a new model of Exemplary Pass, a precision medical artificial ..

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July 9, 2025

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LG AI Research Institute has released a new model of Exemplary Pass, a precision medical artificial intelligence (AI) model.

On the 9th, LG AI Research Institute unveiled ‘EXAONE Path 2.0’, a next-generation precision medical AI model.

Bio is one of the ABCs (AI, Bio, and Clean Tech) that LG Group Chairman Koo Kwang-mo cited as a future growth engine. Exempathy 2.0 is expected to play an important role in the group’s growth strategy.

Exempathy 2.0 is an upgrade of the 1.0 model released in January last year and the 1.5 model released last month, and has learned much higher quality data than the existing model. Pathologic tissue images (WSI) can precisely analyze and predict genetic variation and expression form, microscopic changes in human cells and tissues, and structural features.

Exemplary Pass 2.0 learned multiomics information such as DNA and RNA containing WSI and genetic information together. WSI is a high-resolution digital image taken during the pathologic diagnosis process of observing a patient’s tissue sample under a microscope. However, if AI simply analyzes this, there is a high possibility that a “characteristic collapse phenomenon” will occur, which will lead to poor prediction accuracy.

Exemplary Pass 2.0 applied a new technology that learns from small units to WSI, increasing the accuracy of predicting genetic mutations to 78.4%, the world’s highest level.

In addition, gene activity can be predicted only by image analysis without expensive dielectric tests.

Park Yong-min, leader of the AI business team at LG AI Research Institute, said, “If Exemplar Pass 2.0 is used, the genetic test time that took more than two weeks can be shortened to less than a minute, helping to secure golden time for treatment of cancer patients. If doctors and pharmaceutical companies use Exemplar Pass 2.0, they can identify target treatments in a short time.” The LG AI Research Institute also released additional models specializing in specific diseases such as lung and colon cancer.

LG AI Research Institute also announced a plan to cooperate with Vanderbilt University Medical Center in the United States. It is joined by a research team led by Korean scholar Hwang Tae-hyun, who leads the stomach cancer project of Cancer Moonshot, a cancer conquest project led by the U.S. government. Professor Hwang said, “Our goal is to create an AI platform that can help medical staff treat and treat patients in the actual medical field. The AI platform will not be just a diagnostic tool, but a game changer that innovates the entire process of new drug development.”

Starting with the field of cancer, LG AI Research Institute and Professor Hwang’s research team plan to expand the scope of research to rejection of transplants, immunology, and diabetes in the future. LG AI Research Institute is planning to introduce Exemite Pass 2.0 at the ‘LG AI Talk Concert 2025’ on the 22nd.

[Reporter Lee Deok-ju]



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LG AI Research launches upgraded AI model Exaone Path 2.0 to improve cancer diagnosis, treatment options

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July 9, 2025

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Bae Kyung-hoon, head of LG AI Research, speaks at a conference held at LG Science Park in Magok-dong, western Seoul, on July 19, 2023. [LG]

 
LG AI Research on Wednesday unveiled Exaone Path 2.0, its upgraded artificial intelligence (AI) model designed to enhance cancer diagnosis and drug development. The move aligns with LG Group Chairman Koo Kwang-mo’s vision of making AI and biotechnology core growth engines.
 
Exaone Path 2.0 learns from higher-quality data than the 1.0 version, which was launched in August last year, according to LG AI Research.
 
It can precisely analyze and predict not only genetic mutations and expression patterns but also subtle changes in human cells and tissues. The institute says this could enable earlier detection of cancers, forecast disease progression and support new drug discovery and personalized treatments.
 
A key breakthrough comes from new technology that trains the AI not only on small pathology image patches but also on whole-slide imaging. This pushed genetic mutation prediction accuracy to a globally leading level of 78.4 percent.
 
LG AI Research expects it will help secure the critical “golden hour” for cancer patients by cutting gene test times from over two weeks to under a minute. The institute also unveiled models tailored to specific diseases, including lung and colorectal cancers.
 

Dr. Hwang Tae-hyun, an expert in AI-driven research in precision oncology, immuno-oncology, cellular therapy and 3D/4D molecular modeling, is a professor at Vanderbilt University Medical Center. [LG]

Dr. Hwang Tae-hyun, an expert in AI-driven research in precision oncology, immuno-oncology, cellular therapy and 3D/4D molecular modeling, is a professor at Vanderbilt University Medical Center. [LG]

 
LG is bolstering this initiative through a partnership with Dr. Hwang Tae-hyun at Vanderbilt University Medical Center, a leading expert in biomedicine. Hwang, a prominent Korean scientist, heads a U.S. government-backed “Cancer Moonshot” project targeting gastric cancer. 
 
LG AI Research and Hwang’s team plan to jointly build a multimodal medical AI platform that utilizes real clinical tissue samples, pathology images and treatment data from cancer patients in clinical trials. They believe this will usher in an era of personalized, precision medicine.
 
Their collaboration also underscores Chairman Koo’s push to position AI and bio as technologies that transform customers’ lives. LG AI Research and Hwang’s team see this platform as the world’s first attempt to implement clinical AI in this way.
 
Starting with oncology, the team will expand into transplant rejection, immunology and diabetes research.
 
“Our goal isn’t just to develop another AI model. We want to create a platform that actually helps doctors treat patients in real clinical settings,” Hwang said. “This won’t just be a diagnostic tool — it has the potential to become a game changer that transforms the entire process of drug development.”
 

Performance level of LG AI Research's precision medical AI model EXAONE Path 2.0 [LG]

Performance level of LG AI Research’s precision medical AI model EXAONE Path 2.0 [LG]

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY NA SANG-HYEON [[email protected]]





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