Morgan Stanley Upgrades Lam Research to Overweight at $331, Calls 59% NAND Systems Growth in 2027

By NineScrolls Team · 2026-05-21 · 4 min read · Industry

The Upgrade and the Numbers

On Monday, May 18, 2026, Morgan Stanley upgraded Lam Research (LRCX) to Overweight from Equal-weight and raised its price target to $331 from $293. The shares were trading at $284.72 at the time of the call, implying roughly 16% upside to the new target.

Morgan Stanley applied a 34x target multiple to reach the $331 figure, expanded from the multiple underlying the prior $293 target. The bank lifted its 2027 revenue forecast for Lam Research to $35.4 billion from $34.6 billion, and raised 2027 earnings per share to $9.71 from $9.46.

The bank also widened Lam's valuation premium over Applied Materials from 10% to 20%, slightly above the three-year historical average of 16%, reflecting growing conviction in Lam's share-gain trajectory through 2027.

The NAND Thesis: A Peak Above 2021

The cornerstone of the bullish call is a single forecast: Morgan Stanley now expects NAND systems spending to grow 59% in calendar 2027. If that plays out, NAND wafer fab equipment spending would push past the previous peak set in 2021.

The upgrade marks a notable strategic pivot for Morgan Stanley, which had previously favored DRAM equipment exposure over NAND. The bank is now treating NAND as the next leg of the AI-era memory build-out, alongside HBM-driven DRAM capex that has already absorbed most of the equipment narrative through 2025.

Applied Materials Cut to Equal-Weight

In the same research note, Morgan Stanley downgraded Applied Materials (AMAT) to Equal-weight with a $502 price target. The bank's recalibration of relative valuation now puts Lam at a 20% premium to Applied — a meaningful divergence between the two largest US-listed wafer fab equipment franchises.

The implicit message: in a NAND-led upcycle, the etch and conductor-deposition heavyweight benefits more than the broader process-portfolio leader. Applied Materials remains exposed to the same wave, but Morgan Stanley sees Lam as the higher-beta vehicle.

MKS Instruments Named a Top Pick

Morgan Stanley designated MKS Instruments (MKSI) a Top Pick in the same note, raising its price target to $374 from $354. MKS supplies the plasma sources, RF and microwave power delivery, vacuum components, gas and pressure control, and process instrumentation that sit inside virtually every advanced etch and deposition chamber shipped by Lam, Applied, Tokyo Electron, and ASM International.

The MKS call functions as a second-order bet on the same thesis: if NAND systems shipments expand 59% in 2027, the plasma subsystem and gas-delivery suppliers feeding those chambers see proportional revenue.

Street Consensus and Recent Targets

Lam Research has drawn a wave of price-target hikes in recent weeks. Stifel raised its target to $325 following Lam's fiscal Q3 results, which beat both Stifel and Street estimates. TD Cowen lifted its target to $340 citing foundry and DRAM share gains and the prospect of expanding NAND WFE spending. UBS held a Buy on what it called an AI-driven growth cycle, and Cantor Fitzgerald maintained Overweight at $320.

Street consensus is a Buy, with analyst targets spanning $220 to $385. Twenty-four analysts have revised earnings estimates upward for the forthcoming period. Lam's own fiscal Q4 guidance calls for revenue and margins above its target operating model for calendar 2028 and beyond.

What This Means for Plasma Processing and Thin Film Deposition

A 59% jump in NAND systems spending in 2027 is, in operational terms, a 59% jump in high-aspect-ratio plasma etch and conductor deposition capacity. 3D NAND scaling above 300 layers requires channel hole etches with aspect ratios beyond 90:1, where conventional fluorine-based etch chemistries lose verticality. The tooling that wins this wave is the same tooling Lam has been pushing for several quarters: cryogenic high-aspect-ratio etch and selective ALD. Tokyo Electron is competing in the same lane with cryogenic HF plasma etch, and Applied Materials' Sym3 Z Magnum and Trillium ALD platforms address adjacent steps.

For thin film deposition systems, NAND capex pull-through is heavily weighted toward PECVD and ALD. Each additional NAND layer pair adds a deposition cycle, and the move to molybdenum word lines (replacing tungsten) shifts spend toward Mo-ALD platforms — the same technology Lam has been building out with CEA-Leti and Applied with Tokyo Electron is positioning around. PVD also benefits from the metallization steps tied to higher layer counts.

The MKS Top Pick is the cleanest tell on the supply chain. Plasma sources (RF generators, ICP coils, microwave heads), turbomolecular pumps, mass flow controllers, throttle valves, and downstream sensors are non-substitutable consumables in every etch and PECVD chamber. A 59% NAND tool ramp pulls subsystem orders forward by 6–9 months versus the OEM revenue line, which is why Morgan Stanley elevated MKS alongside Lam. For target-and-precursor suppliers, the implication is the same: Mo-ALD precursor volumes, high-purity tungsten and titanium sputter targets, and high-flow gas delivery hardware all face a step-change in demand if the 2027 NAND ramp arrives as forecast.