Artificial intelligence (AI) stocks had their moment to shine earlier this year. Though the momentum behind such names has slowed as a part of the September (and now October) pullback, I wouldn’t go as far as to say that the recent stalling in such names is a part of a bubble burst.
Indeed, valuations in some of the hottest AI stocks may have overheated this year. But I don’t think anything touching AI is remotely in a bubble. In fact, there may actually be value to be had with some of the more overlooked plays with exposure to generative AI and the next industrial revolution.
Though even the biggest tech trends can lose you money if you pay too high a price, I think that macro fears and high rates have kept enthusiasm (and AI euphoria) tempered.
As such, I view the latest cooling off of the AI names as healthy, not just for the broader batch of high-tech plays but the entire market. It’s one thing for a stock to move into overvalued territory, but it’s another to surge above and beyond absurd levels, dragging everything higher in a frenzy, only to set the stage for a vicious crash.
AI stocks: Are some finally getting cheap as markets sag into October?
Unlike the cannabis boom and bust, the rise of AI looks more than investable, especially if broader markets keep downtrending going into year’s end. If anything, generative AI and firms that effectively leverage its productivity-enhancing power may be the ones that benefit as the lights dim on the economy.
In this piece, we’ll check out two AI plays that look very compelling right now. Enter enterprise cloud pioneer Salesforce (NYSE: CRM) and learning-management system (LMS) software firm Docebo (TSX: DCBO), two firms that are betting on AI initiatives, which may ultimately help them dig out a wider moat around their businesses.
Docebo
Docebo is a Canadian tech firm that boomed during the pandemic lockdown days. The company, which provides corporate training solutions via its LMS platform, is now well off its highs of over $110 per share hit back in its glory day of 2021. Nowadays, shares go for $55 and change, down 50% from its peak. Still, Docebo is not a name to forget about, as it steadily climbs higher. Year to date, the AI-capable stock is up around 20%.
As the company continues innovating, with AI to help enhance its ed-tech and training platforms, growth will follow, regardless of how hard a recession hits. For now, keep the $1.77 billion mid-cap gem on your watchlist, and it’s a Canadian AI innovator who’s not about to pull the brakes.
Salesforce
Salesforce may not be a stealthy way to play the AI boom, but it is one that I believe has been overlooked compared to its “Magnificent Seven” peers. Indeed, Salesforce may very well be the best non-Magnificent Seven stock to own if you want to benefit from the generative AI revolution.
The company’s extensive suite of enterprise software products (which goes well beyond customer-relationship management nowadays) has a nice moat around it. The Slack platform is incredibly robust, with numerous corporate users aboard. And its Tableau business is a shining star as we move deeper into the AI age, where more of us will need tools to visualize and present data sets.
At 127 times trailing price to earnings, the AI stock looks like a buy, as it sails into 2024 with some pretty compelling AI momentum.
