With technology stocks leading the way as we inch closer to the start of the second half, Canadian investors may wonder if it’s a good time to venture south of a border for exposure to some Silicon Valley darlings. Undoubtedly, artificial intelligence (AI) has been the name of the game of late. But it’s not just the U.S. companies that stand to benefit from the profound technology. Here in Canada, there are also intriguing AI innovators that shouldn’t be ignored.
Of course, there’s Cohere, the AI startup behind the Coral large language model (LLM). I’d argue Coral packs a pretty hard punch, even compared to the likes of an OpenAI ChatGPT. With GPT-5 likely on the way, however, every firm in the AI (or should I say LLM) race needs to stay sprinting at full speed.
For now, Cohere is a private firm we can’t invest in through the TSX Index. Either way, there are AI beneficiaries worth owning, even if they’re not pure-play AI firms innovating on the cutting edge of LLM technology.
Don’t expect the pace of AI innovation to slow
To do this, a great deal of spending needs to happen, regardless of where interest rates head next. With the Bank of Canada winding down its interest-driven fight against inflation, it will be interesting to see how the Canadian consumer and economy behave over the next 18 months.
Either way, it feels a heck of a lot nicer to have the Bank of Canada on your side rather than going against them with every painful hike in interest rates. Either way, inflation and rates may finally be destined for lows not seen since before the post-pandemic inflationary surge.
In this piece, we’ll check in with two soaring Canadian stocks that make sense to own now that rates are heading lower while AI continues driving all sorts of gains, from productivity to efficiency and everything in between.
Consider Constellation Software (TSX:CSU), one firm that could really apply its foot to the gas as the AI race kicks things into high gear in the next 18 months.
Constellation Software
Constellation Software is a proven market beater that’s continued to outrun the TSX Index so far this year, with more than 18% gains year to date. Indeed, a hot start to the year could easily follow a cooling off in the second half. However, given the pace of innovation, I’d not be surprised if CSU stock surges past the $4,000 level (shares go for $3,841 and change today) before winter sets in. Indeed, Constellation has had an ear on the software startup scene for quite some time.
As more AI-leveraging startups look for funding, I expect Constellation will be there with a willingness to invest. Though it’s hard to tell which startups and venture capital-esque firms will make it and which will fall flat, I do think Constellation’s managers are the best at differentiating between the long-term winners and the ones that are going nowhere fast.
As a catalyst for innovation, I view CSU stock as a great buy, even with the hefty price tag. Perhaps one share will be enough of a needle mover for your portfolio. In due time, I do hope CSU stock split, perhaps by 20-to-1, to make the name more accessible to everyday retail investors. Until now, there’s no sign that management is interested in splitting, even as shares inch beyond $4,000.
