Shares of Lam Research declined by 3.2% following ASML's cautious outlook for 2026, citing macroeconomic and geopolitical uncertainties, including potential U.S. tariffs, which overshadowed its strong Q2 results.

ASML's warning raised concerns about possible new U.S. tariffs and their impact on the global semiconductor supply chain, leading to fears of reduced capital spending by chip manufacturers.

Despite the current volatility, historical performance suggests Lam Research could recover modestly from recent intraday declines, presenting potential long-term buying opportunities.

Long-term investors who bought Lam Research shares five years ago would see their investment grow to approximately $2,822, whereas similar investments in Teradyne and Applied Materials show more modest or higher growth, respectively.

Applied Materials' stock has declined 22.4% from its 52-week high but is up 16.4% since the start of 2025, with current trading at $190.67.

Lam Research's stock has experienced significant volatility over the past year, with 27 moves greater than 5%, indicating that the recent news is viewed as impactful but not fundamentally damaging.

Lam Research's valuation appears high, trading at 27.5 times trailing earnings and nearly 34 times free cash flow, with analysts projecting less than 17% annual earnings growth over the next five years, raising concerns about its high price.

The industry is shifting towards regional self-reliance, with investors encouraged to reconsider traditional Western semiconductor stocks due to geopolitical tensions and trade uncertainties.

ASML's CFO indicated a significant decline in China's contribution to revenue, from an expected 49% to around 20%, signaling regional weaknesses that could impact future growth.

ASML's fiscal year 2025 sales guidance has been lowered to between 30 billion and 35 billion euros, reflecting a slowdown in bookings and a cautious outlook amid geopolitical uncertainties.

The slowdown in ASML's sales and bookings, which were only 71% of quarterly sales, raises concerns about demand for AI chips and the broader semiconductor market.

Despite recent declines, Lam Research shares are up 34.3% year-to-date and currently trade at $97.38, though they remain below the 52-week high of $107.60 from July 2024.

Investors are advised to underweight semiconductor stocks heavily exposed to trans-Atlantic trade, such as Applied Materials and Lam Research, due to margin pressures and demand volatility.