Artificial intelligence (AI) is revolutionizing industries so thoroughly that it is changing the global investment landscape. Gone are the days when an investor could simply invest their money in a company that was cheap, profitable, and growing.
Today, investors need to consider whether or not their portfolio companies are about to be made obsolete by AI. Although AI hasn’t made any entire industries obsolete just yet, some say that it’s about to. Examples of industries considered vulnerable to automation include search, supply chain management, and accounting. All of these industries still exist, but there’s much money to be made disrupting them.
In this article, I will explore the changes that AI is making, and why, arguably, every investor needs some AI exposure in their portfolio.
The AI shakeup
The reason why AI is such a lucrative investment opportunity — and why having no exposure to it is such a risk — is because it can do the kinds of tasks human beings do cheaper and faster. Until recently, it was only fairly routine tasks being automated by AI.
Now, however, AI is doing some pretty sophisticated work. Among the skillsets that have seen major strides by AI are copywriting, art, and legal research. Some think that AI will get so good that people in these industries will be put out of work and companies in them will go out of business. That remains to be seen, but, certainly, there are efficiency gains to be made, and companies doing AI stand to make piles of money.
The AI stocks I own
When I say that investors need exposure to AI in their portfolios, I’m not kidding. I’m putting my money where my mouth is. Over the last few years, I’ve bought a number of AI stocks:
- Taiwan Semiconductor Manufacturing: the leading contract manufacturer for AI chip companies.
- Alphabet: one of the three big tech companies (alongside Microsoft and Meta) considered AI leaders.
- Alibaba: a Chinese company with whose LLM is already being used in several of its business units. Note: this is an extraordinarily volatile stock that’s easy to get scared out of; do not buy it unless you are extremely experienced and comfortable with volatility.
Canada’s very own AI stocks
Having looked at a few stocks that are doing big things in AI, it’s time to ask the all-important question: Are there any Canadian tech companies doing important work in AI?
Yes, there are, and a few of them are publicly traded!
The Canadian company that (in my opinion) is doing the most interesting things in AI right now is Kinaxis. It is using AI to help businesses make better predictions about key supply chain variables like inputs, inventory and customer purchasing patterns. This is not the kind of AI that ChatGPT or MidValley run on, but it’s AI nonetheless.
The Canadian company that’s doing the most of the type of AI that’s getting publicity these days is Shopify (TSX:SHOP). It is an e-commerce company that uses ChatGPT-like language models to help companies create product descriptions.
Here’s how it works: a company will sign up for Shopify to create a website that sells its products. Then someone at the company will go into their Shopify dashboard and enter some extremely basic facts about their product into a text field. Shopify’s AI will then spit back a product description based on prior descriptions it was trained on — descriptions that are proven to work. Thanks to this and other great features, Shopify has thrived as a company, with 26% revenue growth and $276 million in free cash flow in its most recent quarter.
If you wanted to check out a Canadian company that does “AI” in the way the media means when it uses that term, Shopify would be it. I personally think Kinaxis’s use of AI is more interesting than Shopify’s, but its AI is unique and not ChatGPT-like. SHOP is the one if that’s the kind of AI you’re interested in.