Major announcement: $10 billion share buyback + stock split! Will semiconductor equipment giant Fanlin's stock price soar?

According to the financial news app Zhitong Finance, Lam Research Corporation (LRCX.US), one of the biggest beneficiaries of the AI wave in the semiconductor equipment sector, announced a stock repurchase authorization of up to $10 billion on Tuesday Eastern Time. The company stated that this aligns with their plan to return 75% to 100% of free cash flow to shareholders through dividends and repurchases. In addition, Lam Research Corporation is planning a forward stock split at a ratio of 1 to 10 for its outstanding common stock, with the split expected to take effect after the market closes on October 2, 2024.

Under the new repurchase authorization, the semiconductor equipment giant plans to repurchase up to $10 billion of common stock, with no expiration date on the authorization, allowing for suspension or termination at any time. The company mentioned that this repurchase plan complements any remaining balance from previous authorizations.

The post-split common stock of Lam Research Corporation will begin trading officially on October 3, 2024, under the existing trading symbol "LRCX".

In a statement, Lam Research Corporation noted, "Due to the ongoing stock split plan, the actual number of Lam Research common shares outstanding, as dividends on the company's issued equity, equity incentive plans, and other existing agreements, as well as applicable exercise or conversion prices, will be adjusted proportionally."

Following the stock split plan, the price of the underlying stock significantly decreases, making fundamentally strong stocks more attractive to investors who may have hesitated due to high stock prices in the past.

After the news of the stock repurchase and split, Lam Research Corporation's stock price surged over 5% to $995 in pre-market trading, benefiting significantly from the global trend of AI deployment by companies since 2023. Meanwhile, competitors Applied Materials (AMAT.US) and KLA Corporation (KLAC.US) showed flat performance, and the stock price of ASML Holding (ASML.US), a lithography machine giant in the semiconductor equipment sector, remained unchanged in pre-market trading.

Semiconductor Equipment - One of the Biggest Beneficiaries of the Global AI Wave

Benefiting from the AI wave, key semiconductor equipment suppliers such as Lam Research Corporation and Applied Materials, known as giants in the semiconductor equipment industry, have shown continuous growth in stock prices and performance since Q1 2023. In 2024, they are expected to embark on a new "accelerated growth trajectory" in both performance and stock prices.

Key Semiconductor Equipment Suppliers of TSMC Expected to Expand Sales from 2024 onwards

As the "world's chip manufacturing king," TSMC's most critical semiconductor equipment suppliers, including Lam Research Corporation and Applied Materials, are expected to continuously expand sales from 2024 onwards. This is mainly due to chip manufacturers such as TSMC, Samsung Electronics, and Intel expanding capacity for AI chips based on advanced processes of 5nm and below. Additionally, TSMC's large chip manufacturing plants in the United States, Japan, and Germany are expected to be completed successively this year, along with Intel's construction of a large chip plant in the United States, leading to significant purchases of high-end semiconductor equipment such as lithography machines, etching equipment, and thin film deposition equipment required for chip production These semiconductor equipment suppliers mainly include ASML, Applied Materials, Tokyo Electron, and BE Semiconductor, the top equipment manufacturers in the chip industry chain.

The global demand for AI chips is extremely strong at present, and this explosive demand is expected to continue until 2025. Therefore, chip manufacturers such as TSMC, Samsung, and Intel will expand their production capacity comprehensively. In addition, storage giants like SK Hynix and Micron are expanding HBM production capacity, all of which require large-scale procurement of semiconductor equipment for chip manufacturing and advanced packaging, and even some core equipment needs to be updated. After all, AI chips have higher logic density, more complex circuit designs, and higher power and precision requirements for equipment. This may lead to higher technical requirements in processes such as lithography, etching, thin film deposition, multilayer interconnects, and thermal management, thereby requiring customized manufacturing and testing equipment to meet these requirements. Therefore, ASML, Applied Materials, and Lam Research and other semiconductor equipment giants can be said to hold the "lifeline of chip manufacturing."

In chip factories, Lam Research and Applied Materials are ubiquitous. Unlike ASML, which has always focused on the lithography field, the high-end equipment provided by Lam Research and Applied Materials plays a crucial role in almost every step of chip manufacturing. Their products cover key chip manufacturing processes such as atomic layer deposition (ALD), chemical vapor deposition (CVD), physical vapor deposition (PVD), rapid thermal processing (RTP), chemical mechanical polishing (CMP), wafer etching, ion implantation, and other important chip manufacturing processes.

AI Wave + Stock Split + Buyback, will Lam Research's stock price take off?

Goldman Sachs believes that artificial intelligence is far from exhausting its potential as the "stock power fuel" of the global stock market. In its latest forecast report, the institution stated that the global stock market is only in the first stage of the investment boom led by artificial intelligence, and this boom will continue to expand to the second, third, and fourth stages, boosting more and more industries worldwide.

"If NVIDIA represents the first stage of the artificial intelligence stock trading boom - the AI chip stage that directly benefits the most, then the second stage will be other global companies helping to build infrastructure related to artificial intelligence." The institution wrote. "It is expected that the third stage will involve companies incorporating artificial intelligence into their products to increase revenue, while the fourth stage will see a comprehensive improvement in production efficiency related to artificial intelligence, a prospect that can be achieved in many companies worldwide."

In the second stage of the artificial intelligence investment boom, the focus will be on companies involved in building AI infrastructure other than AI chip providers such as NVIDIA and AMD. This includes semiconductor equipment manufacturers such as ASML, Applied Materials, and Lam Research, as well as chip manufacturers, cloud service providers, data center REITs, data center hardware and equipment companies, software security stocks, and utility companies.

The powerful catalyst of the AI wave is expected to continue to strengthen, coupled with the recent stock split announcement and a stock buyback program of up to billions of dollars, Lam Research's stock price is poised for explosive growth. Prior to the stock split announcement, Lam Research's stock price had already received strong bullish sentiment from Wall Street, mainly due to the strong demand for high-end semiconductor equipment under the AI wave. Tipranks shows that analysts have a highest target price of $1200. Jefferies, a major Wall Street firm, recently raised Farlin Group's 12-month target stock price from $980 to $1100 (as of Monday's close, Farlin Group's stock price closed at $942.04). Meanwhile, UBS Group also continued to raise Farlin Group's stock price from $1130 to $1150, and Citigroup recently raised Farlin Group's stock price significantly from $975 to $1025. Moreover, these bullish Wall Street institutions have all given Farlin Group an equivalent "Buy" stock rating.