The recent innovations surrounding artificial intelligence (or AI) products have attracted widespread attention globally. In the last few months, AI-powered chatbots such as Microsoft’s ChatGPT and Alphabet’s Bard have captured the imagination of individuals around the world.
According to a report from Ark Investment Management, AI software could generate a staggering US$14 trillion in revenue by 2030. We can see why AI companies are attracting billions of dollars in investments while making Wall Street and hedge funds sit up and take notice.
Given these factors, here are two artificial intelligence stocks Canadian investors can consider buying right now.
Down 96% from all-time highs, Upstart (NASDAQ:UPST) is priced at a market cap of US$1.3 billion. Upstart operates an AI-powered lending system that analyzes more than 1,500 variables to gauge the creditworthiness of borrowers. Around 92 lending partners use Upstart’s robust platform allowing them to approve additional loans while maintaining conservative default rates.
Upstart increased revenue by a staggering 1,400% between 2017 and 2022. The AI lending hub went public and listed shares at US$20 during its initial public offering, in late 2020. UPST stock then touched an all-time high of US$400 in October 2021 and is currently trading at US$16.
In 2022, the company saw sales decline 1% year over year as transaction loan volume in Q4 nosedived to 154,000 compared to 495,000 in the year-ago period. As interest rates were hiked in 2022, the demand for loans fell off a cliff, significantly impacting the financials of Upstart. Upstart reported a net loss of US$109 million last year, compared to a profit of US$135 million in 2021.
However, the long-term opportunity for Upstart is quite enticing as it can easily enter other loan verticals and expand into international markets. The loan market in the U.S., including auto, mortgage, small business, and personal loans, is worth close to US$5 trillion each year, providing Upstart enough room to expand its top line. In 2022, Upstart processed over US$11 billion in total loan volume, reporting sales of US$842 million.
A TSX tech stock, Docebo (TSX:DCBO) creates solutions and support systems that enable its enterprise-based customers to teach and train their employees. Its e-learning platform is powered by artificial intelligence, integrating formal, social and experiential learning modalities.
In recent years, demand for Docebo’s suite of products and services has risen at an accelerated pace. In response, the company increased sales from US$41 million in 2019 to US$143 million in 2023.
Docebo ended 2022 with a customer base of 3,394, up from 2,805 customers in 2021. Its average contract value has also increased from US$41,971 to US$46,288 in this period, indicating higher customer spending.
Analysts tracking DCBO stock expect the company to increase sales to more than $300 million in 2024. The expansion in the top line will also help Docebo to increase adjusted earnings per share from $0.28 in 2022 to $0.67 in 2024.
So, Docebo stock is priced at 5.4 times forward sales and 76 times forward earnings, which is quite steep. But a quality growth stock commands a premium valuation. Docebo is trading at a discount of 50% to consensus price target estimates.