NVIDIA (NASDAQ:NVDA) is one of the most popular stocks in the world right now. With a US$2.2 trillion market capitalization (value of all shares combined), it is now bigger than Alphabet. This all came upon us very quickly. In October of 2022, NVDA stock traded at $119 – a mere 13% of today’s stock price. Today, it trades for $875.
The question investors need to ask themselves is, is NVDA stock a buy today? At this point, NVIDIA has risen so much in price that it might be getting overvalued. The stock trades at 67 times trailing earnings (last year’s earnings) and 36 times forward earnings (the best estimate of next year’s earnings). It certainly looks pricey, but it has so much growth that it could be worth the asking price.
Faced with these mixed signals, investors might wish to look into AI plays other than NVIDIA. The stock still has a chance to perform well, but the higher it goes, the more of its future growth is “priced in.” At the same time, there are dozens of AI stocks out there that aren’t pricey at all. In this article, I will explore two Canadian AI stocks you could buy as an alternative to NVIDIA.
Open Text Corp
Open Text Corp (TSX:OTEX) is a Canadian software company that develops content management systems, app development frameworks, and text analysis software. The company’s apps are sold as standalone offerings as well as in bundles. Open Text’s “Magellan” app is a pretty good example of the types of software this company makes. It allows users to quickly access and analyze data, creating (for example) tables and charts.
Open Text Corp is using AI in its business. The aforementioned “Magellan” product is one example of this: it uses AI to sift through piles of complex data and convert them into actionable data. Another example is Intelligent Capture, which reads documents and takes the actionable business insights out of them.
Open Text Corp is doing well with its AI-powered software offerings. In the most recent quarter, it delivered:
- $1.5 billion in revenues, up 71%.
- $1.1 billion in recurring revenues, up 58%.
- $0.14 in GAAP earnings per share (“GAAP” means “generally accepted accounting principles), down 85%.
- $0.85 in adjusted earnings per share, up 39.3%.
It was a pretty impressive showing. Although GAAP net income went down, it was mostly due to non-recurring factors. On the whole, it looks like OTEX’s business is booming.
Kinaxis
Kinaxis Inc (TSX:KXS) is a Canadian software company that uses AI to help businesses make key supply chain decisions. Its supply chain software – Rapid Response – is widely used by manufacturers to help them keep track of inventory. Using Kinaxis’ AI, companies can notice and track trends in inventory and raw inputs, so they always have the items they need on time, every time. Kinaxis is a true growth company, with revenue up 23.2% per year and free cash flow up 46% per year over the last five years. It’s fairly pricey, but not as pricey as NVDA. It’s worth a look.
