Ever take a look at the meteoric rise NVIDIA experienced over the last few years and kick yourself for not buying it?
It’s only natural. The “fear of missing out” (FOMO) is built into our nature as human beings. As social creatures, we naturally feel left out when we see a big party we weren’t invited to. When the “party” in question involves large sums of money, the fear of financial loss combines with the fear of being left out to produce a distinctly unpleasant brew.
With NVIDIA itself having run up many percentage points over a few short years, now might not be the time to go all-in on it. It’s quite expensive. However, there are other stocks that are betting big on AI that have high-flying potential. In this article, I will explore two of them.
Brookfield
Brookfield Corp (TSX:BN) is a Canadian financial services company that is betting big on AI. Specifically, it is investing in AI data centres, which it has been buying at attractive prices. In 2023, it landed a lucrative deal to purchase the bankrupt data centre company Cyxtera, which it later combined with one of its other data centre subsidiaries to form CentreSquare. The new entity is one of the largest investors in AI data centres globally.
Brookfield is also powering the AI revolution in a very literal sense. Earlier this year, its subsidiary Brookfield Renewable Partners scored a deal to supply Microsoft with 10.5 gigawatts of power. The deal could be worth billions of dollars over several years. The energy will partially be used to power Microsoft’s Azure data centres, in which ChatGPT is hosted and served.
There’s a lot more to Brookfield as an investment than just its AI-related activities, of course. The stock is fairly cheap, trading at 0.8 times sales, 1.8 times book value, and 13.2 times cash flow. It’s also internally diversified, with wide-ranging operations across asset management, real estate, insurance and renewables. Finally, Brookfield’s managers think that their company’s stock trades at a discount to its net asset value (NAV). They said this in several quarterly earnings reports, and several independent analysts who investigated the matter agreed.
Kinaxis
Kinaxis Inc (TSX:KXS) is one of Canada’s most important AI companies. It develops supply chain management software that is widely used by manufacturing and logistics companies. It helps such companies keep track of key supply chain metrics such inventory, raw materials, customer activity, and more.
Kinaxis has been developing this kind of software ever since the 1980s. What’s relatively new is the use of AI in the company’s software offerings. Kinaxis’ platforms always helped users store and analyze supply chain data – it started off doing supply chain analysis of mainframe computers. Now, with AI, it can facilitate supply chain analysis more efficiently than ever before. For example, Rapid Response users can have the platform’s AI immediately deliver intelligent insights into their supply chain, without them having to manipulate the data manually. It’s a valuable service that many manufacturing companies can’t do without.
Foolish takeaway
When most people think of “AI,” the first thing that comes to their minds is ChatGPT and similar apps. Such language and image models have stolen the limelight in recent years. But in truth, AI is so much more than that. From data centres and energy to supply chain software, there are many ways for investors to get involved in the AI revolution. Brookfield and Kinaxis are ample proof of that fact.
