AI stocks bucking the trend

AI is likely to ride the next wave of global economic recovery; with the International Data Corporation (IDC) predicting that investment into the technology could reach the $100bn mark by 2022. Stock markets have recognised this trend and here are the three most bullish AI-oriented stocks.

Dynatrace, Inc - their primary focus is to help maintain their customer’s cloud infrastructure; by optimising the storage allocation so that no specific network is strained. The stock caught investor’s attention when their profit per share, last quarter, reached 6 cents. This was double the projected profits. Analysts hope that the firm can maintain this momentum especially as recently they have also restored their free cash flow.

Synopsys has performed equally strong and innovates integrated circuits using AI. Similar to Dynatrace, the stock has outperformed predictions for both the top (revenue) and bottom (profit) lines. The firm also has a very reliable business model, very attractive in this volatile climate, as it offers non-refundable three-year subscriptions. 

 
Visual representation of Synopsys’ services, Source: synopsys.com

Visual representation of Synopsys’ services, Source: synopsys.com

 

Yext uses AI to strengthen branding and search engine optimisation (SEO), working with top clients such as T-Mobile and Taco Bell. The company also benefits from a strong balance sheet: with zero debt and $245mn in liquidity. Traders hope this cash could finance a strong international expansion, which would rapidly increase revenues. 

These three firms have very different functions but their stock prices have rallied for the same reasons: outperforming expectations, high liquidity buffers and reliable business models. The last two factors mean that these firms are well placed as the global economy enters a recession.