By Priyanka G

(Reuters) - Chip-making equipment supplier Lam Research forecast third-quarter revenue above Wall Street expectations on Wednesday, driven by a surge in orders from chip firms amid the AI boom.

Shares of the Fremont, California-based company rose about 5% in trading after the bell.

The rapid growth in artificial intelligence will continue to fuel substantial investments in leading-edge nodes, advanced packaging ,including high-bandwidth memory (HBM) chips, which are critical for high-end applications like AI training. This trend is helping equipment makers like Lam Research.

"Increasing demands on chip performance play into Lam's strengths, with advanced deposition and etch applications set to comprise a growing share of WFE (wafer fab equipment)," said Lam Research CEO Tim Archer".

The company expects revenue for the third quarter to be $4.65 billion, plus or minus $300 million, compared with analysts' estimate of $4.34 billion, according to data compiled by LSEG.

Lam Research develops tools essential for semiconductor manufacturing. Its products are primarily used in wide range of wafer processing and wiring of semiconductor devices.

The company's bigger rival, the Netherlands-based ASML Holdings, on Wednesday reported fourth-quarter bookings which exceeded analysts' expectations, reassuring that AI chip prospects remain strong.

China's AI startup DeepSeek's recent launch of a free AI assistant using lower-cost chips raised concerns over rival profitability and demand for expensive tech, weighing on U.S. AI stocks including Lam Research, KLA Corp and Applied Material.

"We expect growth related to technology spend with non-Chinese customers to easily outpace the sales decline from Chinese customers in 2025," said Kinngai Chan, managing director at Summit Insights Group.

Lam Research posted a second-quarter adjusted profit per share of 91 cents, beating analysts' estimate of 88 cents.

The company posted revenue of $4.38 billion for the three months ended Dec.29, beating analysts' estimates of $4.31 billion.

The results marked the sixth consecutive quarter of revenue growth for the tools supplier.