Dutch semiconductor equipment manufacturer ASML (ASML -0.87%) warned investors that its sales might not grow at all in 2026, and the bad news isn't just crashing ASML stock -- it's taking down rival semi equipment maker Lam Research (LRCX 0.28%) as well.
As of 11:40 a.m. ET, ASML stock is down 11%, but Lam stock is down, too, by 3.6%.
Image source: Getty Images.
Revolution interrupted?
The artificial intelligence (AI) revolution is supposed to be great news for semiconductor stocks -- both sellers of chips like Nvidia, and sellers of the machines that make the chips, like ASML and Lam. However, in its just-released Q2 report, ASML had to admit its earnings grew only 1.7% year over year, and its sales inched only 0.6% higher.
Worse, 5.5 billion euros in "net bookings" for the quarter weren't anywhere near what's needed to replace sales going out the door -- only 71% of quarterly sales, which implies a slowdown in business.
This suggests that demand for AI chips may be less insatiable than investors had been hoping for. That or Trump-inspired restrictions on selling chip-making machinery to China are taking a big toll on sales. Either way, it's bad news for ASML, and probably for Lam Research as well.
Is Lam Research stock a sell?
Priced at 27.5 times its $4.7 billion in trailing earnings, Lam Research stock isn't set up for a letdown in semiconductor sales growth. Worse, when valued on free cash flow (which is weaker than its reported earnings), Lam stock costs closer to 34x FCF.
That's expensive already, based on analyst forecasts that Lam's earnings might grow less than 17% annually over the next five years. If Lam, like ASML, fails to grow at all next year, it might be time to sell.
