As Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR hits a record high, Morgan Stanley is bullish on Lam Research (LRCX.US) as a big winner in the GAA era.

On Monday at the start of U.S. trading, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) hit a record high, with its total market capitalization approaching $2.5 trillion, as optimism over demand for advanced process nodes and AI chips continued to heat up. However, upstream equipment leader Lam Research (LRCX.US) fell 1%. Morgan Stanley's latest research note pointed out that as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR accelerates the rollout of all-around gate (GAA) nodes such as 2nm, Lam Research will be one of the main beneficiaries, reiterating an "Overweight" rating and raising its target price from $367 to $385. December-quarter results are expected to beat expectations Morgan Stanley expects Lam Research to deliver strong results for the quarter ending in December, with revenue potentially reaching $9 billion, above the consensus estimate of $8.5 billion, with risks skewed to the upside. The bank believes the semiconductor equipment industry has broken through demand (cleanroom) and supply chain constraints, and expects the December-quarter wafer fab equipment (WFE) annualized run rate to exceed $200 billion, up 60% year over year. Lam Research is expected to become the fastest-growing equipment maker for a third consecutive year. Given the unprecedented scale of pull-ins in DRAM and 2nm logic processes, as well as the company's execution capability, it cannot be ruled out that its December-quarter revenue guidance could exceed $9 billion. A big winner in the GAA era: logic share continues to rise The report noted that Lam Research's logic share grew by about 300 basis points in 2025 and is expected to increase by another 80 basis points in 2026. Previously, the market questioned the sustainability of the company's logic share gains because part of the 2025 growth was driven by the Chinese market. But Morgan Stanley now believes Lam Research's share in the leading logic market will continue to grow. Specifically, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's 2nm process is a key node for Lam Research's share gains in the GAA era. Morgan Stanley estimates that Lam Research's share gain from 3nm to 2nm is about 200 basis points. Its WFE spending per wafer at 2nm is about 50% higher than at 3nm, while overall WFE spending per wafer rises by about 30%. In addition, Lam Research's share of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's capital expenditure is expected to increase by about 10 basis points from fiscal 2025 to fiscal 2026, and by a more significant about 130 basis points by 2027. Morgan Stanley estimates that Lam Research's logic share will reach 11.8% in 2026, close to its overall WFE share of 12.3%, reflecting the company's transition from a product mix skewed toward NAND to a more diversified end-market portfolio.