Statista Market Insights projects the artificial intelligence (AI) market to reach US$305.9 billion in 2024 and show a compound annual growth rate of 15.8% in seven years. By 2030, the market value should be around US$738.8 billion. With this backdrop, expect AI stocks to drive investments in the tech sector this year.
If you want exposure to AI, two Canadian stocks have visible growth potential in the rapidly growing market. You can kick off 2024 by taking positions in CGI Inc. (TSX: GIB.A) or Open Text (TSX: OTEX).
Growing clientele
Montreal-based CGI caters to an international client base in different industries and markets. Its wholly owned subsidiary, CGI Federal, is a leading federal contractor globally. The $33.3 billion company started as an IT consulting firm in 1976, and today, it delivers an end-to-end portfolio of capabilities, including business consulting, systems integration, managed IT and business process services, and AI solutions.
In fiscal 2023, revenue and net earnings grew 11.1% and 11.3% respectively to $14.3 billion and $1.6 billion versus fiscal 2022. Cash provided by operating activities rose 13.3% year over year to $2.1 billion. “As we look ahead, we are taking the actions necessary to further strengthen our capacity to continue delivering value for shareholders,” said George D. Schindler, CGI’s president and CEO.
Schindler adds that besides cost optimization, CGI will make strategic investments to advance the next wave of innovation and growth, including the responsible use of AI. He believes AI brings the right mix of end-to-end offerings to help clients generate the desired return on investment from their digitization initiatives.
CGI enhances the value of AI solutions for clients through reusable data models and an AI maturity framework. Amazon, Alphabet, and Microsoft form CGI’s solid partner base in the United States.
It secured a five-year contract with the U.S. Strategic Command to advance defence technology. In the U.K., CGI will partner with National Air Traffic Services to transform and modernize the country’s digital infrastructure in air traffic control services.
CGI’s growth runway is long, given the growing clientele, especially in the government contracting industry. This AI stock trades at $143.27 per share. The market analysts’ 12-month high price forecast is $175.
At the forefront of AI innovation
Open Text is half the size of CGI but also an excellent choice. The $15.1 billion company provides information management software and solutions, including Open Text Aviator. Also, at $55.72 per share, you can partake in the 2.39% dividend.
In Q1 fiscal 2024 (three months ending September 30, 2023), total and annual recurring revenues climbed 67.3% and 59.1% year over year to US$1.4 billion and US$1.2 billion, respectively. Net income reached US$81 million compared to the US$116.88 million net loss in Q1 fiscal 2023.
Open Text’s CEO and CTO, Mark J. Barrenechea, said the strong quarterly results are a foundation for a strong fiscal 2024. “For over a decade, OpenText has helped organizations manage large data platforms, and we are at the forefront for the next generation of AI innovation driven by OpenText Aviator,” Barrenechea adds.
Winning AI investments
CGI and Open Text are profitable companies with actual AI capabilities, unlike pretenders riding on the hype. Both companies will be at the front and center of the AI revolution and should deliver healthy, long-term returns.
