How to Invest in C3.ai Stock in Canada

Are you looking for growth from our neighbours to the south? This tech stock has it, but how can Canadians get started?

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published July 10, 2024 4:50 pm EDT

When it comes to investing, Canadians love investing in their own companies. A recent survey by Vanguard found that Canadians currently allocate 50% of their equity exposure to Canadian companies. This is 18 times higher than the percentage of Canadian assets in the global equity market, which is around 2.7%.

Yet despite a growing appetite for global equities, Canadian investors may not know where to begin beyond, say, the “Magnificent Seven.” Today, we’re going to look at one strong and popular stock, C3.ai (NYSE: AI), and why it’s a strong long-term investment for Canadians.

A chip in a circuit board says "AI" — Source: Getty Images

Why C3.ai

Canadian investors might consider buying C3.ai for several compelling reasons. The artificial intelligence (AI) market is expanding rapidly. C3.ai is well-positioned to benefit from this growth, with the AI hardware and services market projected to reach US$90 billion by 2025. This significant market potential can drive C3.ai’s revenue and stock price higher as more businesses integrate AI into their operations.

C3.ai has shown impressive revenue growth and has a diverse and growing customer base. For example, the company reported an 18% year-over-year revenue increase in the fiscal third quarter (Q3) of 2024 and an 80% increase in customer engagements compared to the previous year. The partnerships with major organizations like Boston Scientific, T-Mobile, and the U.S. Department of Defense highlight their strong market presence and potential for continued growth.

What’s more, C3.ai has a first-to-market advantage in enterprise AI, which allows it to capitalize on the increasing demand for AI solutions. Their diverse applications, including predictive maintenance and generative AI, cater to various industries, enhancing their market reach and stability.

Despite some financial challenges, the AI sector’s rapid growth could result in substantial returns for investors. Analysts and market experts suggest that C3.ai’s stock has the potential to reach significant price targets, offering the possibility of high returns over the long term.

How to get started

So, how does a Canadian investor get started? The easiest way is through a Tax-Free Savings Account (TFSA). Any capital gains, interest, and dividends earned within a TFSA are tax-free, meaning you don’t have to pay taxes on the investment income, which can significantly enhance your overall returns.

Furthermore, when you sell U.S. stocks at a profit within your TFSA, you won’t be subject to capital gains tax, unlike in non-registered accounts. Plus, TFSAs offer flexibility in terms of withdrawals. You can withdraw funds at any time without tax penalties and can re-contribute the same amount in the following year.

Finally, U.S. stocks held in non-registered accounts are subject to higher taxes compared to the 15% withholding tax on dividends in a TFSA. This makes TFSAs a more tax-efficient vehicle for holding U.S. stocks. However, note that U.S. dividends in a TFSA are subject to a 15% withholding tax by the Internal Revenue Service. Despite this, the benefits of tax-free growth and withdrawals generally outweigh this minor tax leakage for many investors.