Shopify (TSX:SHOP) stock has continued to be one of Canada’s most favoured tech plays over the past several months, and for a good reason: the company is continuing to innovate. High rates, low rates, it doesn’t really matter. The company continues to drive its innovative e-commerce platform forward. With hopes for lower rates in 2024 and perhaps much lower rates over the next three years, Shopify stock suddenly went from TSX dog to one of the sector’s biggest leaders.
Though the fate of the economy is unknown, I still view shares of SHOP as one of the tech plays to stash in one’s TFSA (Tax-Free Savings Account) for years at a time. The stock is sure to have its stumbles, fumbles, and quarterly tumbles. That said, it’s the long-term horizon that really counts. And investors who have the ability to differentiate between the noise and what actually matters (the company’s longer-term fundamentals), I believe, will be able to snag shares at a discount whenever they head south in a hurry.
Mega-cap tech and generative AI have been the name of the game
With mega-cap tech going from hot to scolding-hot over the past few weeks, questions linger as to when it will end and just how painful it will be for those who are just a tad overweight in the tech heavyweights. Personally, I think valuations (a bit on the high end when it comes to the best of the tech batch) are a tad stretched but not unjustified given the wave of generative artificial intelligence (AI) that could be upon us.
Indeed, it’s really hard to tell how nascent AI will transform into actual cash flows. And how big those cash flows will get in three to five years from now. In 10 years from now, I’d argue that we’ll wonder how today’s top tech titans ever grew at an above-average rate without some help from next-generation AI technologies. For now, investors should treat any near-term pullbacks as more of a buying opportunity than a sign that the next tech bubble is about to burst.
Don’t expect the AI rally to end like the dot-com one did
Despite the recent expansion of multiples in top tech-driven firms such as Shopify, I still don’t view multiples as nearly as expensive as they were in the lead-up to the great 2000 tech bubble. The dot-com bust was unforgiving to those who failed to conduct a thorough valuation. And though the AI-driven tech rally may, in many ways, “rhyme” with the blow-up experienced around 24 years ago, I believe that we’re not yet at the tipping point.
Further, there’s always a chance that AI advances and drives earnings at a far quicker pace than many of us expect. Indeed, AI is unlike the rise of the internet in many ways. Not only could AI push forth a new platform, but it could be embedded across various aspects of our everyday lives. Given this, I think it’s hard to dismiss the mega-cap tech titans, especially those that are on the cutting edge of generative AI right now.
Shopify: An AI company?
Back to Shopify. I believe it to be an AI company, even though many may continue to view it as a small- and medium-sized business e-commerce firm. The company has a lot to gain by embracing the AI trend, and I suspect it will do just that in the coming years.
The e-commerce market with AI and spatial computing could be a heck of a lot different from the way we view it today. For now, I’d look to treat any severe plunges in the name as a potential entry point for young investors seeking growth and AI exposure.
