Missed out on NVIDIA Stock? This Canadian Tech Stock Isn’t Far Behind (You Can Still Get in Today)

NVIDIA stock is on a tear because of AI. If you missed it, here’s a Canadian AI stock to consider.

| More on:
Engineers walk through a facility.

Source: Getty Images

Last week, investors saw NVIDIA (NASDAQ:NVDA) stock soar after it beat earnings expectations and its CEO told investors about how much money the company would make from artificial intelligence (“AI”). On a call after the earnings release came out, CEO Jensen Huang mentioned the many opportunities AI would create for NVIDIA. NVIDIA’s chips are used in the servers that AI runs on, so there may be an opportunity for it to make money as ChatGPT-like apps become more popular.

Nevertheless, the AI opportunity is not worth an infinite price. NVIDIA rallied 15% the day its AI-fueled earnings release came out – it’s starting to get extremely expensive. There are other ways to get in on the AI opportunity without buying extremely expensive stocks. In this article, I’ll explore one Canadian stock that benefits from AI while being much less expensive than NVIDIA. First, though, let’s take a look at the reasons why NVIDIA rallied in the first place.

Why NVIDIA stock soared

The reasons NVIDIA stock soared last week were twofold:

  1. The company’s earnings slightly beat analysts’ expectations.
  2. The call after the earnings release came out mentioned a great opportunity from AI.

Most likely, it was the AI mentions on the earnings call that contributed to the rally the most. This year, we’ve seen many stocks, such as Microsoft, rally simply because they introduced AI services. Investors bought in despite there being no indication that these services would lead to profits. It’s clear that there is some “AI hype” circulating right now, leading to very impulsive stock purchases. This appears to have driven the gains in NVDIA, whose stock rallied 15% after its earnings fell 52%.

Why it’s likely very overvalued now

NVIDIA’s rally last week was all very exciting, but the uncomfortable truth is that NVIDIA is starting to look overvalued. At today’s prices, it trades at:

  • 21.5 times sales.
  • 133 times earnings.
  • 26 times book value.

This is extremely expensive. If you aren’t familiar with the terms used above, they basically mean that when you buy NVIDIA, you’re paying for 21.5 years of sales, 133 years of profit, and 26 times more than the value of what the company owns. If its earnings don’t grow, NVIDIA will take over a century to earn in profit what its stock costs now! That’s an awfully long time to breakeven, and growth is never a sure thing.

A Canadian AI stock that’s much cheaper than NVDA

If you’re looking for a Canadian stock that benefits from the AI opportunity, you could consider Kinaxis (TSX:KXS). Kinaxis is a tech company that uses machine learning to help people identify risks and opportunities in their supply chains. The “supply chain” is the network of suppliers that gets products to the customers. KXS helps people identify risks and opportunities in this domain. For example, it uses AI to help people predict when customers are likely to buy a lot of product, so they can buy more inventory than usual at that time.

KXS is much cheaper than NVIDIA stock, trading at 9.2 times sales and 8.7 times book value. That’s expensive, but not “unbelievably” expensive like NVDA. Also, its earnings are going up this year, not going down. On the whole, it seems less risky than NVIDIA stock.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Kinaxis, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

More on Tech Stocks

stock analysis
Tech Stocks

Investing in AI: 1 Cheap Tech Stock Poised for Growth

Docebo is a little-known Canadian tech firm that's unlocking the power of next-generation AI technologies.

Read more »

Businessman holding AI cloud
Tech Stocks

5 Tech Stocks You Can Buy and Hold for the Next Decade

Don't make the mistake of thinking all tech stocks are alike. These five have a strong future both behind and…

Read more »

funds, money, nest egg
Tech Stocks

TFSA Investors: 2 TSX Stocks for a Legit Shot at $1 Million in 20 Years

Undervalued TSX tech stocks such as Neighbourly Pharmacy can help investors to turn a $100,000 investment into $1 million in…

Read more »

Dividend Stocks

TFSA: 3 Value Stocks to Buy in April

The March dip is a synopsis of the mild recession banks anticipate as high interest rates trickles down. It is…

Read more »

Growing plant shoots on coins
Tech Stocks

Got $5,000? These Are 2 of the Best Growth Stocks to Buy Right Now

If you've got $5,000 to invest, buying growth stocks like Lightspeed Commerce and Microsoft is a smart decision.

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

2 Easy TSX Stocks for Beginners in April 2023

You don’t need to think twice about loading up on these two Canadian stocks in April.

Read more »

calculate and analyze stock
Tech Stocks

Growth Stocks: A Once-in-a-Decade Opportunity to Get Rich

Growth stocks are generally cheap now. So, this year is a good opportunity to shop for growth stocks, perhaps through…

Read more »

grow money, wealth build
Tech Stocks

$10,000 Invested in These Growth Stocks Could Make You a Fortune Over the Next 10 Years

Growth stocks such as Dollarama and Chewy are well poised to deliver outsized gains to long-term investors.

Read more »