Tech stocks at the core of the artificial intelligence (AI) boom have enjoyed strong rallies in the past year. Many now trade at very high multiples, even after the pullback, as investors anticipate surging profits on soaring demand. There is some concern that the market is ahead of itself and that a more serious correction could be on the way.
Conservative investors who want access to the AI benefits in their portfolios but are concerned about tech stock volatility can get exposure to AI in different ways.
Enbridge
Enbridge (TSX:ENB) is best known for its oil pipelines that move roughly a third of the oil produced in Canada and the United States. In recent years, however, Enbridge has directed significant capital investment into its natural gas and renewable energy businesses.
AI data centres use large amounts of electricity. There is concern that the rise of power demand from AI computer servers, in addition to the demand for charging electric vehicles, could put strains on existing power grids. Getting electricity transmission networks upgraded can take more than a decade due to the various permitting processes, so AI data centre firms are planning to install on-site power generation to ensure reliable supply.
Renewables are preferred, and Enbridge’s acquisition of an American wind and solar developer two years ago puts it in a good position to benefit. Data centre companies are also looking at installing gas-fired power generation to complement renewables or to provide all of the power when renewables are not viable. Enbridge’s natural gas transmission network already moves 20% of the natural gas used in the United States. The company’s acquisition of three American natural gas utilities in 2024 makes Enbridge the largest natural gas utility operator in North America.
Enbridge trades near $53 per share at the time of writing. The stock is up about 10% this year but still sits below the $59 it reached in 2022. Investors who buy ENB stock at the current level can get a 6.9% dividend yield. The board has increased the distribution in each of the past 29 years.
TD Bank
TD (TSX:TD) is being investigated by American regulators for not having adequate systems in place to detect and prevent money laundering in the U.S. operations. The bank built up a large American business over the past 20 years through a string of acquisitions that created a network that runs from Maine right down the east coast to Florida.
TD has set aside an initial amount of US$450 million to cover potential fines related to the issue. Analysts have said the fines could run as high as US$4 billion by the time the whole process runs its course. Penalties at this level would eat up a significant chunk of TD’s excess cash that could otherwise be used for growth investments. As such, TD faces headwinds until the situation is put to bed, but the bank will eventually get the problems fixed, and patient investors have a chance to buy TD at a discounted price.
Banks should be huge beneficiaries of adopting AI. Their large pools of client data can be analyzed by the AI programs to identify fraud and other risks while also finding opportunities to pitch tailored product offerings to clients based on their relationships with the bank.
AI chatbots and automated portfolio analysis can improve customer service while reducing staff requirements. This should make banks more efficient and can reduce expenses to boost profits.
TD trades near $81 compared to $108 in early 2022, so there is decent upside potential for the stock. In the meantime, investors can collect a dividend yield near 5%.
The bottom line AI stocks
Enbridge and TD are good examples of non-tech tech stocks investors can consider as options to get exposure to AI in their portfolios. If you have some cash to put to work, these stocks deserve to be on your radar.
