Mizuho Updates Top Picks List

Mizuho analysts have updated their Top Picks List, adding Micron (NASDAQ: MU) and Oracle (NYSE: ORCL) to the roster. The September update includes several other stocks: Coterra Energy (NYSE: CTRA), PG&E (NYSE: PCG) Corp., Terns Pharmaceuticals Inc (NASDAQ: TERN), and Universal Health (NYSE: UHS) Services.

The Top Picks List is a compilation of Mizuho US analysts’ “highest conviction, catalyst-driven ideas.”

Micron: Key Player in AI Boom

Micron is recognized for its memory chip production amid the ongoing AI boom. Mizuho expects improved pricing in DRAM and NAND to benefit the company, with AI-driven tailwinds supporting gains in its HBM (High Bandwidth Memory) market share, especially through its partnership with NVIDIA (NASDAQ: NVDA).

Analysts project that HBM3E will capture around 70% of the HBM market by 2025, with Micron remaining a crucial supplier for NVIDIA’s AI GPU ramp, propelling HBM share growth into the second half of 2024 and into 2025.

Momentum is anticipated to increase in 2025 as AI device adoption accelerates, with AI PCs and handsets expected to require double the DRAM and NAND content compared to traditional devices.

While a yield issue with Micron’s HBM has constrained margin expansion for the November quarter, analysts forecast further improvements by calendar 2025, as HBM constitutes a larger portion of revenue and utilization rates for traditional DRAM and NAND improve.

Analysts stated, “We believe corrections in most consumer end markets are nearly complete, but demand headwinds remain as refresh cycles for handsets and PCs look extended vs. prior years.”

Oracle’s Competitive Advantage

For Oracle, Mizuho believes its cloud infrastructure (OCI) is undervalued by investors, highlighting its competitive pricing—approximately 33% cheaper than AWS. They see significant growth potential as enterprises shift from on-premise to cloud services, with Oracle’s large on-prem customer base providing a future revenue stream.

Additionally, Oracle’s industry-specific applications are expected to effectively capture this transition. Analysts are confident that Oracle can expand its operating margins to 45% by FY26, driven by cloud margin expansion, sales and R&D efficiencies, and leverage from scale.