Mizuho analysts updated their Top Picks List, adding Micron (NASDAQ:MU) and Oracle (NYSE:ORCL) to the roster. Other stocks that were added as a part of the September update are Coterra Energy (NYSE:CTRA), PG&E (NYSE:PCG) Corp., Terns Pharmaceuticals Inc (NASDAQ:TERN), and Universal Health (NYSE:UHS) Services.
The Top Picks List represents a compilation of Mizuho US analysts’ “highest conviction, catalyst-driven ideas.”
For Micron, one of the important players in the ongoing AI boom that produces memory chips, Mizhuho expects it to benefit from improved pricing in DRAM and NAND, with AI-driven tailwinds supporting the company’s HBM share gains, particularly through its partnership with NVIDIA (NASDAQ:NVDA).
The investment bank's analysts project HBM3E to capture around 70% of the HBM market by 2025, with MU continuing to be a key supplier for NVIDIA’s AI GPU ramp, which is likely to drive HBM share growth in the second half of 2024 and into 2025.
The analysts also foresee additional momentum in 2025 as AI device adoption accelerates, estimating that AI PCs and handsets will require double the DRAM and NAND content compared to traditional devices.
While acknowledging that a yield issue with MU's HBM has limited margin expansion in the November quarter, analysts anticipate further margin improvements by calendar 2025 as HBM accounts for a larger portion of revenue and utilization rates for traditional DRAM and NAND increase.
"We believe corrections in most consumer end markets is nearly complete, but demand headwinds remain as refresh cycles for handsets and PCs look extended vs. prior years,” they noted.
As for Oracle, Mizuho’s team believes Oracle’s cloud infrastructure (OCI) is undervalued by investors, emphasizing its competitive pricing, around 33% cheaper than AWS.
They see strong growth potential as enterprise customers increasingly shift from on-prem to cloud, with Oracle’s large on-prem customer base serving as a future revenue stream. Moreover, Oracle’s industry-specific applications are well-positioned to capture this transition.
The analysts are also confident in Oracle’s ability to expand its operating margins to 45% by FY26, driven by “cloud margin expansion, sales and R&D efficiencies, and leverage from scale.”