High-growth companies, mostly tech firms, tend to wilt under rising interest rates and bond yields. Surprisingly, technology is the top-performing sector on the TSX in 2023, outpacing 10 primary sectors with its 31.62% year-to-date gain. Three names, in particular, are riding high because of a common denominator: artificial intelligence (AI).
CGI (TSX: GIB.A), Docebo (TSX: DCBO), and Coveo Solutions (TSX: CVO) are benefitting from the AI boom and emerging as early winners. Investors should be happy that the stocks outperform despite the threat of a pullback due to more rate hikes. Fortunately, the wider adoption and use of AI will strengthen their market positions.
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Underrated AI stock
CGI provides information technology (IT) and business process services in Canada, the United States, and other international markets. The Canadian firm recently made headlines when the Administrative Office of the U.S. Courts (AOUSC) awarded its wholly owned subsidiary, CGI Federal Inc., a 10-year indefinite-delivery, indefinite quantity (IDIQ) contract.
The $32 billion IT and business consulting services company has fortified its position in the growth market of Miami with the acquisition of Momentum Consulting Corporation. Besides creating additional value for clients through deep industry and technology expertise, the merger will add scale and access to new technology platforms.
If you invest today, this underrated tech stock trades at $136.21 per share (+16.71% year to date).
Learning platform with AI foundation
The prospects for Docebo and its learning platform are limitless because AI powers it. This $1.77 billion company creates software, solutions, and support systems to help our customers teach and train stakeholders to ensure they contribute to that growth and business success.
The learning platform’s foundation is anchored on AI and innovation. It acquired Edugo.AI, a generative AI-based learning technology that uses advanced Large Language Models (LLM) and algorithms to optimize learning paths and adapt to individual learner needs.
Docebo will leverage its expertise in enterprise learning to garner a significant share in a large, fast-growing global addressable market. Amazon Web Services, Thomson Reuters, and BMW are among its top clients. At $55.31 per share, DCBO’s positive return is 23.63% but could rise further to $88 (+59%) based on market analysts’ price forecasts.
Leader in sophisticated applied AI
Coveo, a $1.18 billion Software-as-a-Service (SaaS) search engine, is a global leader in sophisticated applied AI. The stock flies under the radar, but the Coveo Relevance Cloud is now a market-leading AI platform. Management believes that AI is powerful and brutal for business.
Its chairman and chief executive officer, Louis Têtu, said, “Our years of experience in developing applied AI solutions for large, complex enterprises have allowed us to bring to market what we believe is a transformative offering in generative AI.” In the first quarter of fiscal 2024, SaaS subscription revenue rose 19% to $28.5 million, while net loss improved to $7 million from $12 million a year ago.
Coveo continues to make waves as a legitimate AI company. At $11.61 per share, current investors delight in the 27.86% year-to-date gain. The TSX has advanced 2.45% in the last five days, but this future multi-bagger gained 14.38%.
AI benefits
AI technology improves customer experiences, reduces costs, and increases economic benefits. CGI, Docebo, and Coveo have done and are still doing all that and more to their customers.
