The development of artificial intelligence (AI) has garnered significant mainstream attention after the release of ChatGPT. Readers may have also been exposed to AI-generated art and creative videos that have taken advantage of AI tools that can effectively mimic celebrity voices. Today, I want to zero in on two AI stocks that could be transformative in the years and decades ahead. Let’s dive in.
Why Canadian investors should get in on the artificial AI revolution
AI development crosses over into a wide array of exciting spaces. That means investors will need to be selective when it comes to hunting down the right equities. MarketsAndMarkets recently estimated that the global AI market was worth US$86.9 billion in 2022. The report estimated that the global AI market would rise to $407 billion by 2027. That would represent a compound annual growth rate (CAGR) of 36% over the forecast period.
ATS is ready to deliver big as automation kicks into high gear in the 2020s
ATS (TSX:ATS) is the first AI stock I’m excited to monitor, as we kick off the 2023 spring season. This Cambridge-based company provides automation solutions to a worldwide client base. It is focused on building factory automation systems. Shares of this AI stock have surged 32% in 2023 as of close on April 4. That has pushed this stock into the black in the year-over-year period.
ResearchAndMarkets recently estimated that the global factory automation and industrial control system market was worth US$194 billion in 2020. At the time, the report projected that the market would reach US$339 billion by 2026. That would represent a CAGR of 9% from 2021 through to the end of the forecast period.
This company released its third-quarter fiscal 2023 earnings on February 9. In the third quarter (Q3) of fiscal year 2023, ATS posted revenue growth of 18% to $647 million. Meanwhile, its Order Backlog increased 45% to $2.14 billion. This AI stock offers middling value compared to its industry peers. However, it is on track for very strong earnings growth going forward.
Here’s why Kinaxis remains by favourite AI stock on the TSX right now
Kinaxis (TSX:KXS) is the second AI stock I’d watch closely this year and beyond. This Ottawa-based company provides cloud-based subscription software for supply chain operations in North America and internationally. Its shares have climbed 19% in the year-to-date period. That has pushed Kinaxis up 9% year over year.
A recent report from IMARC Group estimated that the global supply chain management software market reached US$15.8 billion in 2022. This market researcher projects that this market will reach US$33.9 billion by 2028. That would represent a CAGR of 12% over the forecast period.
In fiscal 2022, Kinaxis delivered total revenue growth of 46% to $366 million. Meanwhile, SaaS revenue increased 22% year over year to $213 million. EBITDA stands for earnings before interest, taxes, depreciation, and amortization; it aims to give a clearer picture of a company’s profitability. Kinaxis posted adjusted EBITDA growth of 99% to $79.4 million in fiscal 2022.
This AI stock has surged back to profitability as we look ahead to its fiscal 2023 performance. Beyond its impressive growth potential, Kinaxis boasts an immaculate balance sheet.