Mulberry: WDAY Vastly Oversold; PLTR, NOW, IBM Strongholds in Software

SPEAKER_1 (0:00)

It's time to go deep on Workday. Our tech spotlight focusing on Workday and more, Brian Mulberry, Chief Market Strategist, Zacks Investment Management is with us. We can start off just with the software trade overall. You think maybe it's oversold. Why is that?

Brian Mulberry (0:18)

Well, I think there's been a lot of AI inferences that just haven't come true. I mean, go back six months ago, and there was a paper that AI was going to wipe out 80% of white-collar jobs in the next couple of years. And in that assumption was just the capability being able to do so much on its own autonomously. And that simply hasn't materialized in terms of the capability of AI bots or AI agents. They still need a lot of training on their own, but also they need guidance. And that's where this layer of software comes in. And it makes sure that if you are using generative AI, that it stays on task and it doesn't get into a feedback loop and give you bad information. So we're finding that software names are deeply oversold at this moment in time. And we're finding that there's good opportunities in terms of valuations in the moment as well.

SPEAKER_1 (1:07)

So I was looking through that and you were talking about how AI needs this software for training, for guidance, really gives them the productivity that they need but also teaches them to maximize the use of the tokens so they don't break the bank on compute which I thought was fascinating. I mean it's basically rationing your funds and in this case the funds are compute.

Brian Mulberry (1:33)

Absolutely. Uber is kind of the standard here, right? They showed us in Q1 that if you just let AI use run wild and the token maxing takes over, then you end up spending quite a lot more than you expected. Uber spent their entire years worth of IT budget in Q1.

Then you're left with a decision, do I do four times more spending for the entire year or do I look for a way to make IT usage more efficient? That's again where this layer of software is coming into play, where you might not need to access the highest expense frontier model tokens when you can do some of the planning with some of the cloud-based free models that are out there and available and it takes an intelligent software written directly for your business to be able to help you make that decision. It creates a layer that is much more efficient but also productive and that's what really is going to affect the bottom line is we want productivity to increase monetization and that means better profitability. That's really what we're looking for at the end of the day.

SPEAKER_1 (2:33)

Looking, maxing, maxing anything probably that there's only a certain amount of it may not be a good try, right? When you talk about the maxing of tokens, not great. So looking to something like Workday, for example, and Adobe, and we can go into that as well. But is that the software that they need? Is this the applications that can help them to manage everything in a better way?

Brian Mulberry (2:58)

Yeah, absolutely. So what Workday is doing, I mean, they understand the threat. Over a long period of time, you could see where AI agents might be able to come in and do accounting and payroll on some of the other services that are important to their HR business. But they might not be able to do it at the same scale that Workday has worked so hard to provide. They're such a large provider.

They are the platform of record for so many different businesses. What Workday is doing to combat the AI's influence is build a harness, if you will, is what they call it in the software world, where you can plug in various AI agents that you might be interested in using, that will help, again, guide the artificial intelligence through your system in an intelligent way, in a useful way, so that the information actually is productive, and hopefully, more profitable in the back end. Again, we're finding that there is a high degree of adaptive nature to these software companies, looking at what AI on its own is capable of doing, and how they can actually improve those results by engineering the software in a more focused and targeted way.

SPEAKER_1 (4:07)

I was saying and started this segment, software you said oversold. Are these the kinds of names you would step in and buy on a dip day, for example? I mean, it looks like when I had looked earlier, I saw Workday on an uptrend. But maybe on a day of selling, do you get in these names like Workday and Adobe or what other software interests you?