Increasing investments are being made in the semiconductor industry to address a global chip shortage and meet surging demand across industries worldwide. This, along with recent technological breakthroughs, makes the prospects bright for companies in this space. As such, both Applied Materials (NASDAQ:AMAT) and Lam Research (LRCX) should benefit from the industry’s growth. But which of these stocks is a better buy now? Let’s find out.Applied Materials, Inc. (AMAT) in Santa Clara, Calif., and Lam Research Corporation (NASDAQ:LRCX) in Fremont, Calif., are two prominent players in the semiconductor industry. AMAT provides material engineering solutions for making semiconductor chips to electronic manufacturers of flat panel displays, solar photovoltaic cells, and modules. The company also supplies equipment to produce coatings for flexible electronics, packaging, and other applications. LCRX, in comparison, designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used to fabricate integrated circuits. It serves semiconductor memory, foundry, and integrated device manufacturers (IDMs) that make non-volatile memory (NVM), dynamic random-access memory (DRAM), and logic devices.
Despite the current semiconductor chip shortage, the global semiconductor industry witnessed 29.7% year-over-year sales growth in August 2021. To address the shortage crisis and satisfy surging demand, governments and enterprises are making considerable investments in the industry. This, combined with recent technological breakthroughs made by chipmakers, positions the industry for solid growth.
Investor optimism in this space is evident in the SPDR S&P Semiconductor ETF’s (XSD) 13.8% gains over the past three months, versus the SPDR S&P 500 Trust ETF’s (SPY) 4.1% returns. The global semiconductor market is expected to grow at a 7.7% CAGR to $778 billion by 2026. So, both AMAT and LRCX should benefit.