Last night Vice-President Adriano Galliani confirmed Massimiliano Allegri had requested a new centre-forward.
Qualification for the Champions League group phase has opened up fresh funds for transfers.
So far, Matri had been the absolute favourite, though he would cost €12m to prise away from Juventus.
It would be a return for Matri, who grew up in the Milan youth academy before continuing his career elsewhere.
However, according to the Corriere dello Sport, Hernandez has emerged as a new candidate for the role.
He has different characteristics to Matri, as the Uruguay international is very fast and eager to leave Palermo following their relegation into Serie B.
Genoa have also confirmed their interest in Hernandez, although they expressed concern at the price of the operation.
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