Tapping Into the Future: The Rise of AI Stocks

AI stocks are all the rage, but that can be quite the problem. That’s why investors should consider these stocks before any of the new and “exciting” options.

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Artificial intelligence (AI) stocks became all the rage in the fall of 2023. It seemed as though every tech stock latched onto to this aspect of growth, attempting to seize the opportunity for a share rebound. And granted, they need it as tech stocks have plummeted after a period of growth during the pandemic.

But why exactly are AI stocks rising? And is this future method of growth sustainable? Let’s take a look, and offer some investment options for those interested in AI stocks.

Why the growth in AI stocks?

It all started with ChatGPT. If you’re unaware, ChatGPT was the headliner that offered a way to “chat” with AI. You could find answers to just about anything, with data up until September of 2021. It was revolutionary, providing the ability to do everything from create codes and spreadsheets, to planning a birthday party.

Once released, every tech stock and their parent company came out with their own type of AI. AI stocks that had been using AI for years also became all the rage once more, seeing a rapid increase in share price. So it’s no wonder that tech stocks, after years of dropping, wanted to seize the opportunity.

But the question now becomes whether this is a bubble set to burst or a sustainable investment strategy for AI stocks.

That depends

If you’re looking at investing in AI stocks, I suggest looking to past bubbles so that this one doesn’t burst. The key is to follow the money, and that means going to companies which have invested in tech and AI for years, if not decades.

That would mean looking at companies such as Microsoft and Alphabet if you’re considering investing in AI stocks, certainly. These companies have the cash on hand to invest in the programs, and will certainly do it properly.

But that doesn’t mean there are no opportunities here in Canada. Instead, here is where you need to find AI stocks that have been using some sort of AI method for years. What’s more, they’ve expanded and plan to expand more within the sector. For that, I would look to OpenText (TSX:OTEX) and Kinaxis (TSX:KXS).

Why these two AI stocks

Both OpenText stock and Kinaxis stock have been in the AI game a long time. OpenText stock has become a powerhouse in the sector, expanding AI options for its customers, clients, and employees alike. In its recent OpenText World event, it released several new AI options. Everything from tracking products and identifying cybersecurity issues, to a chatbot to find and create documents.

Meanwhile, Kinaxis stock has also been focusing on AI for years. It’s one of the AI stocks using its “Rapid Response” services to identify potential problems and respond rapidly to the issue. This allows for products to be delivered as soon as possible, with far fewer opportunities to see issues crop up. Something that continues to be a drag in the market.

Both OpenText stock and Kinaxis stock, however, aren’t as “exciting” as these companies providing new opportunities among AI stocks. But that’s why those companies are due likely to fall rather than continue climbing steadily. That’s why I would consider Kinaxis stock and OpenText stock while down 5.5% and up 17% in the last year, respectively. Either way you’re getting in on a long-term opportunity. One that has a far better chance to pay long term, and not drop.

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 Amy Legate-Wolfe has positions in Alphabet and Kinaxis. The Motley Fool recommends Alphabet, Kinaxis, and Microsoft. The Motley Fool has a disclosure policy

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