Searching For Top AI Stocks Beyond Nvidia And Google? Workday Has Tapped AI To Drive Demand Among Top Funds
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Searching For Top AI Stocks Beyond Nvidia And Google? Workday Has Tapped AI To Drive Demand Among Top Funds

Aug 29, 2023

When investors think of artificial intelligence and the top AI stocks to buy and watch, names like Nvidia (NVDA), Alphabet (GOOGL), Microsoft (MSFT) and Meta Platforms (META) often come to mind. But human resources firm Workday (WDAY) also signals its presence on the AI and machine learning radar screen as it earns a spot on the IBD Breakout Stocks Index alongside Nvidia.

Workday also joined Meta stock, Tesla (TSLA) and fellow enterprise software firms ServiceNow (NOW), Salesforce (CRM), Datadog (DDOG) and (MNDY) tapping AI demand to earn a spot on this month's list of new buys by the best mutual funds.

And WDAY stock has worked its way onto both the IBD 50 and IBD Big Cap 20 screens, a feat also achieved by ServiceNow and Nvidia. Meta stock and Google stock made the IBD Big Cap 20 list of top large caps.

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Headquartered in the heart of Silicon Valley, Workday provides enterprise cloud applications for finance and human resources. Its applications for financial management, human resources, planning, spend management and analytics have artificial intelligence and machine learning built into their core.

The deep integration of AI and machine learning enables clients to power intelligent predictions and automation into their workflows.

Workday is used by more than 10,000 organizations around the world and across industries — from midsize businesses to more than 50% of the Fortune 500.

Alongside ServiceNow, Workday shares top billing in IBD's Computer Software-Enterprise industry group, with the highest-possible 99 Composite Rating. The group ranks No. 42 out of the 197 industries IBD tracks.

Over the last three quarters, Workday has generated average earnings growth of 52.3%, including a 72% increase last quarter. The company's jump to $1.43 earnings per share marked a third straight quarter of earnings acceleration. Over the last three years, Workday has posted average annual EPS growth of 18%. For the current quarter, Wall Street forecasts a 41% earnings increase.

Top-line growth has been solid and steady, earning the AI-powered firm an A SMR Rating, which tracks sales growth, profit margins and return on equity. In its latest report, Workday reported revenue of roughly $1.8 billion, a 16% gain over the prior-year quarter.

Workday was featured in this column on June 14, just after it had cleared a 206.68 buy point from a cup pattern. Since then, despite a correction in the market indexes, WDAY stock has continued to rise, holding support at its 21-day and 50-day moving averages. An upward-trending relative strength line highlights Workday's market leadership.

Nvidia stock has shown similar strength while Google stock has bounced back its buy zone as the S&P 500 and Nasdaq enter recovery mode. Meanwhile, fellow AI stocks Tesla, Microsoft and Meta look to retake some key moving averages.

Currently extended, Workday may form a flat base, three-week tight formation or another possible entry. While it's best to avoid starting new positions in any stock during a market correction, Workday's strength and resilience in a tough environment bodes well for the stock. Similar action in Nvidia and Google stock further shows the demand for AI stocks remains intact.

Plus, as the market indexes strengthen, Tesla, Microsoft and Meta stock look to regenerate their climbs.

The IBD Breakout Opportunities ETF (BOUT) from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.


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