The artificial intelligence (AI) boom may very well be just getting started. Though numerous tech companies with skin in the game have surged through the year, investors shouldn’t be so quick to take profits off the table. Sure, valuations in the leading AI plays may be higher than just a few months ago. However, the next act of the AI boom may be just as meaningful as the first. And with that, a longer-term perspective may be the one to adopt as an investor looking to profit from the so-called AI revolution that’s taking hold right now.
Here in Canada, there aren’t that many AI stocks that can help you gain a massive edge over the broader markets. In the U.S., there’s no shortage of tech companies with AI innovation in their veins. As the Canadian dollar looks to gain ground relative to the greenback, it may make sense to take advantage of September’s slip in various tech plays.
In this piece, we’ll look at one American AI play and a Canadian one that investors may wish to consider buying into recent market-wide weakness. High rates and recession jitters may be gripping markets in fear for now. But we can’t discount the longer-term potential behind AI to help jolt profitability.
Consider shares of Google search owner Alphabet (NASDAQ: GOOGL) and learning management system (LMS) software company Docebo (TSX: DCBO), as AI stocks to keep watch of going into October 2023.
Alphabet
Many investors may view Google Search as a potential technology that could lose an edge, as ChatGPT and other generative AI products strengthen. As ChatGPT improves, one has to imagine Google will need to go all-in on AI to avoid getting disrupted by its rise.
Fortunately, Google has been “all-in” on AI for quite some time now. Google Bard and Gemini make for fantastic responses to the disruptive rise of ChatGPT. Add DeepMind into the equation, and GOOGL stock certainly stands head and shoulders above peers in the AI scene.
Though Alphabet may be a slow starter in the AI race (at least compared to OpenAI), I wouldn’t bet against the company as it looks to ready profound AI technologies for the masses. All considered, Alphabet stock is one U.S. stock that Canadian investors should not count out of the game just because it’s trading at a discount to some of its “sexier” AI peers.
At writing, the $1.67 trillion tech titan trades at 28.5 times trailing price-to-earnings. That’s not too high a multiple considering the many doors that next-generation AI technologies will open for the firm. Search and ads may face increased competition over the near term, but longer term, AI stands out as a major net positive for a firm like Alphabet, which has not cheaped out when it comes to innovative spend.
Docebo
For investors with a bigger appetite for risk, Docebo seems like an intriguing play now that it’s down more than 52% from its all-time highs.
The $1.7 billion company received a nice Hold-to-Buy rating boost from a Morgan Stanley analyst just over a month ago. The analyst views Docebo as an LMS market disruptor that’s primed to take additional share. I couldn’t agree more, especially as the company leverages AI tech to help enhance its offerings.
Though riskier than Alphabet, Canadian investors should keep Docebo on their radars, as the potential upside could be considerable if the firm can retain its edge in the LMS space. Further, recent momentum is encouraging, with shares of DCBO now up over 42% over the past year.
