Mizuho Ranks Micron and Oracle as Top Investment Choices

Mizuho's Investment Insights: Micron and Oracle Stand Out

Mizuho analysts have recently expanded their Top Picks List, featuring Micron (NASDAQ: MU) and Oracle (NYSE: ORCL), two technology giants that are making headlines in their respective sectors. The firm sees promising prospects for these companies, especially in light of current market trends and innovations.

Micron's Role in AI Advancements

Micron, a key player in memory chip production, is strategically positioned to benefit from the ongoing AI revolution. As demand for AI-capable devices rises, Micron is expected to see an increase in its DRAM and NAND pricing, bolstered by its partnership with NVIDIA (NASDAQ: NVDA). This collaboration is particularly noteworthy, as it enhances Micron's potential to capture a significant share in the High Bandwidth Memory (HBM) market.

Market Expectations and Projections

Analysts at Mizuho anticipate that HBM3E will dominate approximately 70% of the HBM market by the year 2025. Micron is poised to be a crucial supplier for NVIDIA’s upcoming AI graphics processing unit surge. Such developments are likely to stimulate Micron's HBM market share growth, especially in the latter half of 2024 and into 2025, coinciding with increased AI device adoption.

Challenges and Future Prospects for Micron

Despite the yield issues impacting Micron's HBM margins in upcoming quarters, analysts are optimistic about future margin improvements leading into 2025. As HBM contributes more significantly to overall revenues and the utilization of traditional DRAM and NAND improves, Micron's revenue potential looks promising.

Consumer Market Sentiments

The analysts believe that the corrections occurring in various consumer markets are reaching a conclusion, yet challenges remain. Refresh cycles for handsets and PCs are expected to be prolonged compared to earlier trends, which could continue to affect demand.

Oracle's Cloud Infrastructure Potential

Turning to Oracle, Mizuho's team highlights the potential of Oracle’s Cloud Infrastructure (OCI) as significantly undervalued by market participants. They emphasize that OCI's competitive pricing is approximately 33% lower than that of Amazon Web Services (AWS), positioning it strategically in a competitive landscape.

Growth Opportunities in Cloud Transition

As enterprise customers increasingly migrate from traditional on-premise solutions to cloud-based systems, Oracle stands to benefit greatly. With a substantial existing on-premise customer base, Oracle is well-placed to tap into this transition, converting traditional revenues into future growth.

Expanding Operating Margins Ahead

Furthermore, Mizuho's analysts express confidence that Oracle can elevate its operating margins to 45% by the fiscal year 2026. This growth will be fueled by enhancements in cloud services profitability, efficient sales and research and development practices, and the advantages of operational scale.

Frequently Asked Questions

What companies did Mizuho add to their Top Picks List?

Mizuho added Micron (NASDAQ: MU) and Oracle (NYSE: ORCL) as new additions to their Top Picks List.

Why is Micron considered a key player in the AI boom?

Micron produces essential memory chips and is positioned to benefit from rising demand for AI technologies, particularly through partnerships with companies like NVIDIA.

What are Oracle's competitive advantages in the cloud market?

Oracle's cloud infrastructure offers competitive pricing and is strategically positioned to capture a growing customer base transitioning from on-premise systems.

What are the projections for Micron's market share in HBM?

Analysts expect Micron to capture around 70% of the HBM market by 2025, primarily driven by advancements in AI technologies.

How does Mizuho view Oracle's future operating margins?

Mizuho analysts believe Oracle can achieve operating margins of 45% by FY26, supported by cloud growth and operational efficiencies.

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