The tech stocks in Canada stand out from the rest of the market for their rapid growth potential and volatility. But there is a lot of variation even within the sector. For example, crypto stocks tend to be more volatile, whereas tech companies with mature products and platforms may experience steady and predictable growth.
However, there is a new “phenomenon” in the tech sector that may have a significant impact on a wide variety of tech stocks, regardless of their industry affiliations and unique target markets. The phenomenon is artificial intelligence (AI), and it’s changing not just the tech sector but the market as a whole in unprecedented ways.
AI technologies are rapidly evolving, and their impact on the market is difficult to predict, which makes it challenging to choose the right AI stocks that you can hold long term.
That said, there are two AI stocks that you may hold for the next decade.
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An information management solutions company
Waterloo-based OpenText (TSX: OTEX) grew out of a University project and was established as a separate business entity in 1991. It has focused on data indexing and search from its inception and later expanded to enterprise-level information management systems or IMSs. This business area is ideally suited for AI since data is key to the development, growth, and improvement of AI systems.
This makes OpenText ideally suited to thrive in an AI-oriented market. The company has been pivoting to AI and AI-based products for some time now and has expanded its reach from AI features in its platforms to AI-based products like OpenText Aviator, which is the company’s trademarked suite of AI products for a wide range of B2B clients of OpenText.
OpenText is one of the few tech companies that offer dividends, and it’s also a Dividend Aristocrat that has been growing its payouts for about 10 years. Its growth, while not in sync with the fast growers in the sector, has been quite adequate, and the company rose by 104% in the last 10 years. But if its AI solutions start gaining enough traction, the stock may see a new era of rapid growth.
A logistics technology platform company
Descartes Systems Group (TSX: DSG) has developed a logistics platform that connects and supports a massive network of logistical endpoints like manufacturers, suppliers, transporters, etc. The platform is an important cog in the massive machine that is the global supply chain, and the company has seen significant growth thanks to this platform.
The company has been integrating AI tools and Machine Learning (ML) technologies into its platforms and solutions for some time now, and these technologies have augmented many of the platform’s features and functionalities.
As a stock, the most noticeable feature of Descartes Systems is its growth consistency. The rate of growth is also quite admirable and allowed the stock to grow over 665% in the last decade, but its consistent bull market phase with relatively few slump and recovery cycles is something only a handful of tech stocks can offer to their investors.
Foolish takeaway
Identifying AI stocks to invest in and selecting stocks you can hold for a decade are two very different questions. There are several smaller AI stocks that may have explosive growth potential, but they cannot be considered healthy long-term picks yet.
In contrast, Descartes and OpenText are mature tech businesses with a strong AI component that may experience long-term growth at least partially fueled by AI.
