Artificial intelligence (AI) stocks in Canada present a growing opportunity for investors, with the sector experiencing rapid expansion. As of 2023, the Canadian AI market is projected to grow at a compound annual growth rate (CAGR) of around 25% over the next five years. This is driven by advancements in machine learning, automation, and data analytics.
Despite this growth, AI-focused companies remain a smaller portion of the TSX, with only a handful of pure-play AI stocks available. Investors looking to capitalize on this trend may find significant long-term growth potential in Canadian AI stocks as the global demand for AI solutions continues to rise. So, let’s look at three that could create big gains.
Constellation Software
Constellation Software (TSX:CSU) is known for acquiring, managing, and building vertical market software businesses that cater to niche industries. But what sets this company apart is how it’s weaving AI into its software fabric. This ensures its businesses are not just running efficiently but also staying ahead of the curve.
AI is becoming an increasingly significant part of Constellation’s strategy, from predictive analytics that help businesses forecast needs to automation tools that streamline operations. This focus on innovation has contributed to the company’s strong financial performance. In the most recent quarter, Constellation reported a 21.10% year-over-year increase in revenue, hitting $9.27 billion. Even more impressive is the 71.80% jump in quarterly earnings growth.
Speaking of value, Constellation’s stock has had quite a run. The stock price has climbed 48.30% over the past year. Add in a steady dividend with a forward annual yield of 0.14%, and Constellation continues to look like a solid bet for those interested in a tech company that’s making smart moves with AI.
Magna
Magna International (TSX:MG), a giant in the automotive world, is steering its way into the future with a strong focus on AI and autonomous driving technologies. The company has been investing heavily in AI to enhance its advanced driver-assistance systems (ADAS) and autonomous vehicle capabilities. By integrating AI into its offerings, Magna aims to make driving safer and more efficient.
In terms of financial performance, the recent quarter reported revenues of $43.07 billion. The diluted earnings per share came in at $4.74, reflecting a 7.7% drop in quarterly earnings growth. Despite these challenges, Magna remains a key player in the automotive industry, leveraging its strong AI capabilities to stay competitive. With a forward price-to-earnings (P/E) ratio of 6.94, the stock appears to be trading at a reasonable valuation, especially for those who believe in the future of AI-driven vehicles. Now, Magna’s forward annual dividend yield of 5.02% is a nice perk for investors looking for income.
OpenText
OpenText (TSX:OTEX) is a stock helping companies organize, manage, and leverage their data. But where it really gets exciting is how OpenText is diving into the world of AI. The company is infusing AI into its platforms to enhance data analytics, automate workflows, and provide businesses with insights that were previously unimaginable. It’s like giving companies a crystal ball powered by machine learning.
The company’s financials reflect a solid, if somewhat mixed, performance. In its most recent quarter, OpenText reported revenues of $5.77 billion. While the quarterly revenue growth dipped by 8.60% year over year, the company is still managing a healthy operating margin of 16.74%. The stock now offers a forward annual dividend yield of 3.54%. This should appeal to income-focused investors. The stock’s beta of 1.13 indicates it’s slightly more volatile than the market, so it might not be for the faint of heart. But for those who believe in the power of AI to revolutionize enterprise software, OpenText is definitely a player to watch.
