The use of artificial intelligence (AI) across many industries should drive efficiency gains for companies and reduce expenses to buffer profits. At the same time, firms that supply the fuel and power needed to run AI infrastructure should also benefit.
Tech stocks have been the core focus of the AI boom over the past two years, but AI investing goes way beyond suppliers of computer chips and computer servers.
BCE
Communications providers, including BCE (TSX:BCE), should see a rise in data consumption in the coming years as people and businesses use expanding AI programs. The result should be higher average account revenue from clients that need to upgrade their data plans to accommodate their increasing needs.
BCE can also use AI to analyze its own internal customer data to identify opportunities to make customized product offerings. In addition, the technology can be harnessed to improve customer service responses while reducing staff levels.
BCE trades near $47 at the time of writing. The stock was as high as $74 in 2022, so there is decent upside potential for a recovery.
Rising interest rates in 2022 and 2023 drove much of the downside in the stock. Recent cuts to interest rates by the Bank of Canada will reduce borrowing costs for BCE and should ease pressure on profits and could free up more cash for distributions.
On the operational side, price wars in the Canadian communications sector could ease next year. At the same time, BCE’s aggressive cost-cutting initiatives in 2023 and 2024 should show up in the 2025 results.
Regulatory and competitive headwinds will likely limit the upside over the near term, but investors who buy BCE at the current level get paid well to wait for the rebound. BCE currently provides a dividend yield of 8.5%.
TD
TD (TSX:TD) is another top TSX dividend stock that fell out of favour with investors in the past year but should be a solid contrarian AI pick right now for buy-and-hold investors. Banks know a lot about the spending, savings, and investing patterns of their customers. AI programs should enable TD to analyze this data to speed up the approval process for loan applications while identifying opportunities to pitch other fee-generating financial products.
TD trades near $80 per share at the time of writing compared to $108 in early 2022. Falling interest rates should take some pressure off struggling borrowers and will eventually lead to reduced provisions for credit losses (PCL) that soared at TD and its peers over the past few quarters.
TD is also dealing with issues in its U.S. operations. American regulators are investigating TD for not having adequate systems in place to detect and prevent money laundering. AI will play a part in the improvement of fraud detection at TD and the overall banking industry. TD has already set aside US$450 million for potential fines connected to the issue. The bank will eventually get the problem sorted out and remains very profitable as it works through the challenges.
Investors who buy TD at the current level can get a dividend yield of 5%.
TC Energy
TC Energy (TSX:TRP) is a major player in the North American natural gas infrastructure industry, with 93,000 km of natural gas transmission lines and 650 billion cubic feet of storage capacity in Canada, the United States, and Mexico.
TC Energy recently identified the growth in AI data centres as an opportunity to drive revenue growth in the coming years. These facilities consume large amounts of electricity, and many of the firms building AI data centres are looking at gas-fired power generation as an on-site option to ensure a reliable power supply. TC Energy says its natural gas infrastructure in the United States is within 24 km of roughly 60% of the 300 AI data centres that are currently planned or under construction in the United States.
TC Energy raised its dividend in each of the past 24 years. At the current share price, investors can get a dividend yield of 6.4%.
The bottom line on AI stocks to own for decades
BCE, TD, and TC Energy are good examples of non-tech stocks that should benefit from the adoption and growth of AI in the coming years. If you have some cash to put to work, these stocks deserve to be on your radar.
