Artificial intelligence (AI) could become a $14 trillion opportunity. And investors who get in early will reap most of the rewards. According to the investment firm Ark Invest, the AI market has the potential to reach $14 trillion in revenue by 2030. Ark is known for making some wild predictions, but this one could actually come true. The biggest players in U.S. AI already do over a trillion a year in revenue when you combine them. It isn’t unrealistic to think that these big tech giants plus smaller firms could reach $10 trillion in (combined) revenue or more.
But before you go out and buy the obvious AI leaders, like Alphabet and Microsoft, you need to remember that these are fairly mature companies that are already worth over a trillion dollars each; the “easy money” in these names has likely already been made. I personally hold Alphabet stock, and I think it’s a good long-term bet, but I’m under no illusions that it will become a 10-bagger. If you are looking for such “long-shot” bets, read on. In this article, I will explore three Canadian AI stocks that could have room to run.
Shopify
Shopify (TSX:SHOP) is a Canadian technology stock that is making some big investments in AI. It is using AI in a number of ways at its business. Most of these AI uses are behind the scenes, but a few are clear and visible to the user. For example, Shopify vendors can now use AI to write quick and punchy product descriptions for their offerings. This feature helps vendors save time and money on their marketing efforts.
Is Shopify a good stock, apart from the AI angle? In my opinion, it’s not the worst bet out there, but it’s not my favourite either. The company has good growth: in its most recent quarter, sales grew at 26%, and gross profit grew at 11%. The company was not profitable, however, and its stock trades at 10 times sales. So, it’s a little bit pricey.
Kinaxis
Kinaxis (TSX:KXS) is another AI stock like Shopify, this one growing even faster. In its most recent quarter, KXS’s revenue grew at 44%, and the company was profitable!
Kinaxis is using AI at its business to help users manage their supply chains. A company’s “supply chain” is its network of suppliers that provide it inventory it sells to customers. Companies have to keep track of how much product customers are buying, and at what times they’re buying to buy the right amount of inventory. KXS’s AI lets them do that.
How is KXS stock as an investment overall? Much like Shopify, it is fairly pricey, trading at 10.5 times sales and 84.5 times earnings. I’d give KXS the nod over Shopify, though, because it’s at least profitable.
Open Text
Open Text (TSX:OTEX) is another Canadian company that is working on AI projects. It is using AI to help users with text analytics; for example, it can summarize documents to gain key insights.
OTEX is not the most exciting tech company in the world overall. Its growth over the last five years has been pretty mediocre, with revenue only growing at 6% CAGR. However, its AI investments are quite interesting, because they are similar to the ones that Google and Microsoft are working on to so much applause. These investments could create new opportunities for the company.
