What is artificial intelligence (AI)? AI is a technology that gives a computer the power to learn from trends and patterns, infer and act like a human, and make decisions. Like a human goes to school to learn, the computer first trains on the available data to prepare for the task. When on the job, it modifies its learning from experience, perfecting its decision-making skills. Such an application can be used in multiple ways for different things.
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AI opportunities
Companies are using AI technology across a wide range of applications – to enhance data management and security, streamline workflow to improve productivity, personalize user experiences and customer service at e-commerce platforms, drive vehicles, refine search results and more. AI could replace mundane tasks and help humans do more in less time. But how will it make money?
More personalized searches and user experience will help merchants target the right audience for the right products and optimize the marketing budget. Security and data management will help better serve the clients and make everything more efficient. AI could make robotics a reality.
Just as software and the internet enhance productivity, AI can take productivity to another level. These outcomes will take time to materialize in revenue and profits, as you need a whole AI ecosystem and widespread adoption. This ecosystem will also include rules and regulations governing the ethical use of AI.
Three TSX stocks harnessing AI opportunities
Canadian tech companies, especially those in software and information technology services, are using AI to improve their offerings. However, it will take time for AI investments to show results. Thusly, you can invest in software companies with stable cash flow and a strong customer base. AI could help them increase their average revenue per user.
OpenText
OpenText (TSX: OTEX) is an information management solutions provider that helps companies manage all types of information, such as private data sets, business transactions, operational content, application code, and intellectual property. It is using AI to help companies improve the efficiency of their information in a safe environment through OpenText Aviator.
While OpenText does not expect any significant boost from the addition of Aviator, it expects to remain sticky with its customers. The software maker for enterprises expects to continue growing through subscriptions and client support. Aviator will help companies use AI on their private data in a secure environment. AI is as good as the data it is trained on. Businesses can train AI on their specifications using OpenText Aviator and do much more. The stock can generate stable growth and give you market-beating returns.
Kinaxis stock
Kinaxis (TSX: KXS) is using AI for predictive analysis in supply chain management services. It is using AI to make accurate predictions for demand and inventory and manage supply. Kinaxis is using AI’s ability to learn from situations and respond quickly to changes, ensuring agility in business planning and the digital supply chain. Just like OpenText, the impact of AI won’t be visible in revenue and profit, but it will help Kinaxis improve efficiency and stay ahead on the technology curve.
The stock is highly volatile, and it is better to buy the dip. The recent tech stock sell-off has pulled the stock down almost 15% in August, creating an opportunity to buy.
Coveo Solutions
While Kinaxis and OpenText have made artificial intelligence a part of their software service offerings, Coveo Solutions (TSX:CVO) is offering generative AI applications to companies. Coveo Relevance Augmented Generative Answering (CRGA) platform helps companies offer AI-powered searches and recommendations. Its success with Xero has attracted other enterprise customers. Coveo is working on more than 75 large GenAI enterprise projects at various stages.
Coveo is a relatively new company and is still making losses. In the last two years, its revenue grew 15% annually. It spent 43% of the revenue to acquire new clients. The risk is high since it has not yet proven its business stability. However, this risk also comes with the potential to win big if the company’s CRGA is widely adopted and becomes sticky.
Any tech to succeed needs wide adoption and should be sticky.
