Young investors should take advantage of their TFSAs (Tax-Free Savings Accounts) while they can still afford to take a bit of risk with higher-growth stocks. Undoubtedly, you shouldn’t “chase” what’s hot. These days, artificial intelligence (AI) stocks are incredibly hot, even as some pundits out there use the dreaded word bubble to describe the recent surge since the beginning of the year.
Has it been an impressive run? It definitely has been, and though multiple expansion-driven rallies can accompany a great deal of potential downside risks, I think investors must carefully factor in just how companies plan to monetize new AI technologies and what the timing of future cash flows will look like.
Indeed, AI may or may not have an immediate impact on cash flows, depending on the company under question. In any case, investors must conduct a careful valuation before committing to purchasing any stock, no matter how hot or cold!
TFSA investors: Betting on the AI trend … wisely
At this juncture, I’m inclined to bet on the rise of AI. However, you must look away from the absurdly expensive AI stocks and consider ones that Bay and Wall Street may have overlooked. In this piece, we’ll have a look at two names that could benefit from the rise of AI over the coming years.
Do note, though, that it can take many years (think at least five) for AI technologies to really work their way into the financial results. Emerging technologies are never easy to evaluate, but they are definitely worth investing in if you’re a young investor who seeks to turn your TFSA portfolio into a supercharged growth engine for the long haul.
Shopify
First up, we have shares of e-commerce software developer Shopify (TSX:SHOP), which could stand to gain from the rise of AI in the future. Indeed, the company hasn’t really had the same type of “AI day” that some of the American big-tech companies have. However, I don’t think it’s too far-fetched to see Shopify innovate alongside the likes of its AI-driven, mega-cap tech peers.
For now, Shopify stock is in the middle of a hot run that may run out of steam before the $100 level is broken. The stock was lowered to “in line” by Evercore, mostly due to the sudden pop in valuation. It’s hard to argue that Shopify is still a cheap stock after more than doubling off its lows.
Still, young TFSA investors should keep the stock on watch, as it may be able to hop aboard the AI bandwagon in a similar manner as its big-tech rivals.
Kinaxis
Kinaxis (TSX:KXS) is a $5.3 billion company that builds software to help firms manage operations and the supply chain. Amid pandemic lockdowns, shares of KXS skyrocketed, only to fluctuate (and slump) in the years that followed.
The company stands out as one that could use AI in its favour. Recently, the chief executive officer, John Sicard, sat down with interviewers at BNN Bloomberg, chatting about how he expects AI will impact the industry. Indeed, Kinaxis already makes good use of AI to help make sense of complex supply chains. Moving forward, I’d look for the firm to keep investing in its AI talents. As it does, it may be difficult to keep KXS stock down.
