3 Legacy Tech Companies Reemerging as AI Leaders

Key Points

• Micron is the leader in HBM memory, which is critical for deploying accelerated computing solutions, including AI.
• Oracle has emerged as a budding hyperscaler with some of the most advanced data centers and is the go-to source for AI data center services.
• Palo Alto Networks is the leading cyber security company globally, using AI to detect and mitigate the rising number of threats. 

Legacy, product-based software technology is quickly becoming obsolete. Not only is the cloud the dominant force in technology today, but AI is also rapidly advancing, altering how software technology is used. Today, we look at three once-powerful legacy software technology companies reemerging as AI powerhouses. They have adapted to the changes and can now benefit from them in the long term, growing and driving shareholder value. With the AI boom expected to last for decades, the opportunity for value gains is significant. 

Micron Memory Is Central to AI, NVIDIA GPUs, and Data Centers

Micron NASDAQ: MU is a leading memory chipmaker for legacy technologies and is now the AI leader. AI requires lots of memory for training and inference, and the solution is HBM. High bandwidth memory provides the capacity and power needed, and Micron’s HBM3E technology is the best. The HBM3E architecture provides industry-leading capacity and power usage, which is critical for AI function and cost. The more advanced AI becomes, the more power it consumes, increasing operating costs. 

Regarding demand, the legacy business continues to weigh on results but is offset by robust growth in the higher-margin data center and AI industries. The company is taking share in those categories, growing its data center business 40% sequentially in Q3, 400% compared to the previous year, and is expecting strength to continue. The forecast is for the HBM market to double sequentially in Q4 and then quadruple in size over the next few years. The estimates for systemwide revenue growth is for it to double within the next two years and sustain record levels for the subsequent three to five years. 

The analysts moderated the price target outlook at the end of 2024 but continue to expect a robust gain. The range of targets runs from $98 to $250, with more than 80% of the December targets in the $125 to $145 range bracketing the consensus. Consensus is down from its peak but forecasts a solid 55% upside for the market. 

Oracle Follows the Money Into the Cloud: Becomes Database of Choice for Hyperscalers

Oracle NYSE: ORCL embarked on a game-changing mission in 2011 when it launched its first cloud products and shifted into overdrive with the advent of its Gen 2 Cloud. Today, Oracle’s subscription-based cloud business has surpassed its legacy product business in terms of its contribution to the net, and its share is growing. 

Oracle is not only a budding hyperscaler building some of the most advanced data centers on the planet but also a leading provider of services for AI developers and AI-enhanced data management services. It has partnerships with the three leading hyperscalers, including Google, Amazon, and Microsoft, embedding its tools into their networks, making it the most readily accessible and easy-to-use database on the market. 

Results in 2024 include slowing growth, with legacy business offsetting the cloud, but also evidence of mounting leverage. The company’s remaining performance obligation, RPO, was up nearly 50% at the end of CQ3 due to strength in next-gen technologies. This suggests revenue growth will accelerate as the year progresses and remain strong well into 2026 or later. Analysts rate this stock as a Moderate Buy and see it advancing at least 8% from 2024’s closing price. However, the revisions trend is positive, with the consensus up 7% in December and 45% for the year, pointing to a much larger 25% gain at the range’s high end. 

Palo Alto Changes With the Times: Secures AI Using AI

Palo Alto Networks NASDAQ: PANW is the world’s leading cyber security company, with businesses supported and driven by secular trends, including AI. Not only is AI driving an increase in cyber threats and their severity, but Palo Alto’s ability to detect, prevent, and mitigate those threats. 

The critical development for Palo Alto Networks investors is the move to platformization. Unifying its tool into a single, easier-to-use format is critical to retaining existing clients and gaining new ones. Results from 2024 reveal that the near-term impact of the plan on revenue and earnings growth was less than feared, and the potential for gains was more than forecasted. Analysts rate this stock as a Moderate Buy and see it rising 10% at MarketBeat’s reported consensus and another 20% at the high-end range.