$6,500 worth of new TFSA contribution room for 2023 is now available!
After a year of waiting, investors now have an extra $6,500 in tax-free space to invest in. If your TFSA was maxed out last year, now you can start adding to it again. If you already had some spare contribution room around, now you have $6,500 more.
If you have some TFSA contribution room that you want to put to work for you, you might be wondering what to invest it in. Certainly, index funds are always good bets, but sometimes, you want to get a little more adventurous and invest in an up-and-coming technology.
One technology that fits that bill today is artificial intelligence (AI). AI stocks are rising this year thanks to the massive success of ChatGPT in growing its userbase. The biggest names in the space are rallying hard. In this article, I will explore three AI stocks that may be worth adding to your TFSA in 2023.
Kinaxis
Kinaxis (TSX: KXS) is the most obvious AI play in Canada. Other Canadian tech companies use AI to some extent, but Kinaxis is investing in it the most heavily and is using it for the kinds of things that get investors excited.
Kinaxis develops supply chain management software for companies. Using KXS’s software, companies can identify sales risks, spot key demand times, and predict how much inventory they will need to serve customers. Kinaxis uses AI to help with these key functions of its software.
For example, Kinaxis AI can be used to quickly analyze purchasing patterns at a company over the course of a year and determine how much inventory will be needed at each date in the next year. KXS has always had solutions for this kind of thing, but now, with AI, it can recognize demand spikes even more efficiently than ever before.
Kinaxis’s strategy appears to be paying off. In its most recent quarter, it delivered
- $98 million in revenue, up 44%;
- $62.2 million in gross profit, up 40%;
- $8.5 million in profit, up from a $2.9 million loss; and
- $21.1 million in adjusted earnings before interest, taxes, depreciation, and amortization, up 87%.
It was a pretty strong quarter, all things considered. The growth, of course, was very good, and the profitability metrics (e.g., 63% gross margin) were also good.
Microsoft
Microsoft (NASDAQ: MSFT) is in some ways the most “obvious” AI stock out there. There is no AI company more popular right now than OpenAI — the makers of ChatGPT — and Microsoft owns 33% of it. If you’ve ever wanted to “invest” in ChatGPT, then Microsoft would be one way to do it, because it owns a substantial interest in the service.
The downside is that MSFT is a very expensive stock. At today’s prices, it trades at 32 times earnings and 10.5 times sales, despite the fact that earnings declined last quarter. This definitely isn’t a value investment, but if you want to bet on innovative AI technology, Microsoft is a stock that lets you do that.
Alphabet
Alphabet (NASDAQ: GOOG), better known as Google, is a U.S. technology company best known for search, social media (YouTube), and AI.
Its AI chatbot service, Bard, is the most popular chatbot that is not based on OpenAI’s GPT technology. Google developed the service itself in house. AI services are expensive to run, and Google may face higher costs by running Bard than it would have by keeping Google Search the way it always was. However, the company enjoys a 90% market share in search overall, high profit margins, and (compared to Microsoft), a relatively modest valuation. Overall, this stock is probably not a bad bet right now.
