Canadian pensioners are trying to get their heads around the artificial intelligence (AI) mania that has driven markets significantly higher over the past year and a half. While they wonder which AI stocks are best to buy, the sharp correction that recently occurred in the segment is a reminder that tech stocks can be volatile. Fortunately, investing in AI goes well beyond the tech sector.
AI impact for investors
Every few years, something new emerges in the technology industry that has the potential to significantly impact how people work and conduct their daily activities. AI is touted as being the biggest development since the launch of smartphones, which many retirees initially considered strange but now use on a regular basis. AI will likely be similar.
Media reports on AI have largely focused on how large language models (LLMs) scour the internet to find information to quickly reply to requests. These AI programs can write books, create art, and complete university exams with a precision that matches or beats human performances. This is disrupting education, entertainment, and many other industries and will force change that is going to be uncomfortable and exciting at the same time.
For investors, the goal is to identify companies that will benefit from the adoption of AI. This can range from suppliers of core tech products and services required to support the expansion of AI across the globe to firms that harness customized AI programs to make their businesses more profitable.
On the tech side, it might be best to simply add a tech-focused ETF to the portfolio if this isn’t already part of the holdings. Regarding the other areas of AI exposure, some of the traditional pensioner picks could actually benefit handsomely from the expansion of the technology.
Finance
Banks and insurance companies have massive amounts of internal data that can be harnessed to make their operations much more efficient. This can range from speeding up loan and policy approvals to identifying opportunities to offer new products to existing customers. Canadian firms like Royal Bank of Canada (TSX:RY) and Manulife (TSX:MFC) are good examples of finance players that should be able to benefit from the use of AI programs.
Energy
AI data centres consume large amounts of electricity. The rapid expansion of AI is going to put pressure on electricity grids in many areas where it is difficult to upgrade infrastructure quickly to meet these needs. As such, many data centre firms are looking at options for on-site power-generation facilities to ensure reliable power.
Renewables are preferred, but solar and wind have limitations. Natural gas is emerging as the next-best fuel alternative for steady and rapidly scalable power generation in many cases. Energy infrastructure players like TC Energy (TSX:TRP), with vast natural gas transmission and storage assets, are already identifying AI growth opportunities.
AI stocks for retirees
Banks, insurance companies, and energy infrastructure firms are just a few of the types of companies that should be indirect beneficiaries of the AI boom. Seniors already own many of these stocks as anchor holdings in their retirement portfolios, so there might not be a need to significantly adjust the asset mix to benefit from the growth in the adoption of AI.
