A Beginner’s Guide to Artificial Intelligence Investing

Canadians should be on the hunt for exposure to artificial intelligence stocks like Kinaxis Inc. (TSX:KXS) and BlackBerry Ltd. (TSX:BB)(NYSE:BB).

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In the middle of June, I’d discussed why it is a smart move for investors to get in on artificial intelligence (AI). The development of AI has the potential to dramatically reshape our economy and society for decades to come. Today, I want to discuss why Canadians should seek exposure to this space. Moreover, I want to look at two stocks that are betting big on AI to propel their growth going forward. Let’s jump in.

Why Canadians should invest in AI today

AI development is occurring in a broad array of sectors. On one hand, this makes it difficult to invest in what may be considered an “AI stock.” However, it also means that investors are offered some flexibility when it comes to seeking exposure to this space. A wide variety of entities, from banks to retail to aerospace and defence, are getting in on the AI boom.

A December 2019 report released by Grand View Research projected that the global AI market would reach $390.9 billion by 2025. This would represent a monster CAGR of 46.2% from 2019 to the end of the forecast period. Improved image recognition technology will be key in the development of self-driving cars. This brings me to the first stock we can target today.

One reeling stock to watch in this space

BlackBerry (TSX:BB)(NYSE:BB) is an exciting stock, because of its exposure to promising markets like cybersecurity and automated vehicle software. However, shares have dropped 20% in 2020 as of close on July 3. The stock has increased 44% over the past three months.

The company released its first-quarter fiscal 2021 report on June 24. Non-GAAP revenue came in at $214 million — down from $267 million in the prior year. Earnings per share rose to $0.02 over $0.01 in Q1 FY 2020, while GAAP net loss per share ballooned to $1.14. BlackBerry did not provide an outlook for the full year due to uncertainty surrounding the COVID-19 pandemic.

BlackBerry completed its acquisition of Cylance in February 2019. The California-based AI and cybersecurity company has already provided a boost to BlackBerry. Shares of BlackBerry last had a solid price-to-book value of 1.4. This company boasts a footprint in cybersecurity, and its QNX software is embedded in tens of millions of vehicles around the world.

This AI-connected stock is on a tear

The S&P/TSX Composite Index often receives criticism for its small technology weighting. However, Canada has managed to produce very exciting companies like Shopify. Kinaxis (TSX:KXS) has been one of my favourite targets since its IPO in 2014. This company has powered Canada into becoming a global leader in supply chain and operations planning software.

Shares of Kinaxis have climbed 143% year over year at the time of this writing. It has won massive clients like Ford, Toyota Motors, and Unilever with its RapidResponse software offering. Kinaxis’s software utilizes artificial intelligence and machine learning to give companies a clearer picture of their supply chain. For example, the self-healing supply chain is built using advanced machine learning algorithms. It allows Kinaxis customers to see high-impact exceptions between designed and actual performance.

Kinaxis stock is pricey right now, but this is an AI stock to hold for the long term. Value investors may want to await a more attractive entry point in 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Ford. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool recommends BlackBerry, BlackBerry, and KINAXIS INC.

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