Artificial intelligence (AI) stocks in Canada are an emerging sector with significant growth potential as global demand rises. In fact, the Canadian AI market is expected to grow at a compound annual growth rate (CAGR) of approximately 25% from 2023 to 2028.
Although AI-specific stocks represent a smaller portion of the Toronto Stock Exchange (TSX), Canadian companies are increasingly leveraging AI in their platforms. This has created substantial investor interest. Yet despite the current smaller market share, the rapid expansion of AI technologies presents a significant long-term opportunity for Canadian investors. Today, let’s look at some investors should keep on their radar.
OpenText
OpenText (TSX:OTEX) might just be the best-kept secret for investors looking to ride the AI wave on the TSX. As a leader in Information Management, OpenText is at the forefront of integrating AI across its product suits. It’s transforming how businesses manage, process, and analyze data. With a market cap of around $10.97 billion and a solid track record of innovation, OpenText is positioning itself as a key player in the AI space. This makes it a top pick for those looking to capitalize on the booming AI sector.
The company’s recent financial performance underscores its strong position. OpenText stock reported total revenues of $5.77 billion for fiscal 2024, demonstrating its resilience and capacity for growth, even in challenging market conditions. What’s more, OpenText’s strategic investments in AI and cloud services have positioned it well for future growth. It holds a focus on expanding its margins and enhancing shareholder value through initiatives like its $300 million share-repurchase program. This commitment to returning capital to shareholders, combined with a forward price-to-earnings (P/E) ratio of just 8.26, makes OpenText stock a compelling value play with significant upside potential.
For dividend investors, OpenText stock sweetens the deal with a forward annual dividend yield of 3.54%. This robust dividend, coupled with the company’s strong cash flow and commitment to innovation, provides a steady income stream. Yet also offering exposure to the high-growth AI sector. In short, OpenText offers a unique blend of stability, growth, and income, making it an ideal stock for investors looking to add a touch of AI brilliance to their TSX portfolios.
Kinaxis
If you’re on the lookout for the best AI investment on the TSX, look no further than Kinaxis (TSX:KXS). This powerhouse in supply chain orchestration is not just riding the AI wave; it’s leading it. Kinaxis’s recent financial performance speaks volumes, with a stellar 15% growth in annual recurring revenue, driven largely by its AI-infused platform, Maestro. This platform is revolutionizing how businesses manage complex supply chains, making Kinaxis stock a must-have in any AI-focused portfolio.
What sets Kinaxis apart from the crowd is its unique blend of AI with a human touch. This ensures that even the most intricate supply chain challenges are met with efficiency and precision. The company’s focus on profitability is paying off as well. It had a 19% adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin, and a record number of new customer wins in the second quarter of 2024. These figures aren’t just impressive; they’re a clear signal that Kinaxis stock is on a growth trajectory that investors can’t afford to miss.
Investing in AI is all about finding companies that are not only innovative but also have the financial stability to weather market fluctuations. Kinaxis fits this bill perfectly. With over $282 million in cash, minimal debt, and a forward-thinking approach to AI and technology, Kinaxis is positioned to be the cornerstone of your AI investment strategy. Plus, with the market demanding better orchestration solutions, Kinaxis is ready to deliver, and so is your portfolio.
