Decoding Profits: Best Canadian AI Companies to Invest in Right Now

Kinaxis (TSX:KXS) stock is one of Canada’s best AI companies.

| More on:

Artificial intelligence (AI) stocks have been some of the best-performing stocks of 2023. NVIDIA (NASDAQ:NVDA) stock has risen 213% for the year; Alphabet, Microsoft, and other AI names have risen as well. Basically, if a company is making big investments in AI, investors are buying it — whether the company is profiting off the investments or not.

Some aspects of this AI momentum make sense, but other aspects of it do not. For example, NVIDIA does deserve at least some of the gains it has made this year, as it’s actually profiting off AI; Microsoft, so far, is merely sinking money into it. It’s a mixed picture. However, now, with these AI-powered applications going mainstream, there may be profits not just for NVIDIA, but for software companies as well.

In this article, I will explore two TSX AI stocks that may be worthy additions to a tech stock portfolio.

Kinaxis

Kinaxis (TSX:KXS) is a Canadian supply chain management company. It develops software that helps companies keep track of inventory, customer purchases, and other things relevant to supply chains. KXS has been developing such software since the 1980s. In recent years, it has added AI to its software applications. With the use of AI in KXS, you can now automatically have your software tell you how much inventory is needed on what date. In the past, you’d have had to skillfully “use” the software to yield such insights. Today, with AI, it’s just about automatic.

In its most recent quarter, Kinaxis delivered the following:

  • $105 million in revenue, up 31%
  • -$2.54 million in profit, improved by 3%
  • -$0.09 in diluted earnings per share, improved by 10%
  • $15 million in adjusted earnings before interest, taxes, depreciation, and amortization, up 47%

That is pretty strong growth. The profitability was not amazing, but with fast-growth companies like KXS, investors are willing to forgive a lack of profit sometimes. The high growth points to a more profitable future. Of course, investors are paying for all this growth: KXS trades at very high price-to-earnings, price-to-sales, and price-to-book ratios. If the company can keep the growth up, then it may prove to be worth it.

Shopify

Shopify (TSX:SHOP) is a Canadian technology company that sells a platform businesses can use to sell their goods online. It also recently got into the point of sale (POS) business, which involves selling the software that operates cash registers.

Shopify has been a popular and high-flying Canadian tech stock for some time now. It recently got into using generative AI in its software. Shortly after the launch of ChatGPT triggered an arms race in everything AI related, SHOP launched an AI service of its own. It uses large language models to create ad copy for vendors’ products automatically. This service can save vendors a lot of time and money. So, it may be a useful feature that compels more vendors to sign up for one of Shopify’s subscription plans.

Foolish takeaway

AI has been the big theme of the markets in 2023. Between ChatGPT, MidValley, and their Big Tech equivalents, there’s been a lot to keep up with. There are many Canadian companies pushing the needle of innovation in AI. The two in this article would be good ones to look at when building your tech stock portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has positions in Alphabet. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Alphabet, Kinaxis, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

More on Tech Stocks

woman looks at iPhone
Tech Stocks

Shopify, Lightspeed, and WELL Health: Are They Good Buys Today?

While broader markets have rallied, Shopify, Lightspeed, and WELL Health stocks haven't followed suit, showing weaker performance.

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

2 Canadian Stocks That Could Turn $10,000 Into $100,000

If there are two Canadian stocks worth the investment, it has to be these two offering up decades of growth.

Read more »

coins jump into piggy bank
Tech Stocks

The Smartest Way to Invest $7,000 in Your TFSA This Year

Investing in small-cap TSX stocks such as DTOL should help TFSA holders deliver outsized gains in 2025 and beyond.

Read more »

dividends can compound over time
Tech Stocks

The Smartest Growth Stocks to Buy With $1,000 Right Now

Have $1,000 to invest for growth? These three Canadian stocks could still have a long runway to grow sales and…

Read more »

match strikes and starts a flame
Tech Stocks

2 Explosive Stocks That Could Go Parabolic

As the TSX rallies, these two explosive stocks are showing no signs of slowing down, backed by solid fundamentals and…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Tech Stocks

The $28,000 TFSA Strategy That Balances Growth and Security

A $28,000 TFSA strategy must have stock holdings that balance growth and security.

Read more »

dividend growth for passive income
Tech Stocks

The Best TSX Stocks to Buy for a Decade or More of Growth

The recent market correction has created opportunities to buy high-quality TSX stocks at attractive valuations. Here are three to look…

Read more »

online shopping
Tech Stocks

Best Stock to Buy Right Now: Shopify vs Lightspeed?

One has a proven track record while the other offers a speculative opportunity for triple-digit gains. But the Shopify vs.…

Read more »