Artificial intelligence (AI) stocks will be major movers over the next week as some profoundly influential and colossal forces within the scene look to unveil their latest (and hopefully greatest) quarterly earnings numbers. Hopes are high, perhaps so high that it will take a massive guidance hike and a delightful surprise or two to move the needle on shares of the reporting companies. Indeed, quarterly earnings season can make or break the AI stocks.
Additionally, if demand for AI acceleration hardware and other products falls well short of expectations, we may begin to hear pundits refer to AI stocks as a bursting bubble. Indeed, some bubbles are tough to recognize until well after they’ve burst. Multibagger gains, high price-to-earnings (P/E) ratios, and non-stop chatter about a handful of specific firms may indicate an inflating bubble.
Personally, I don’t think AI is a bubble in a traditional sense. AI can and will generate considerable sales and earnings growth. However, the big question is whether such an AI-induced boost is overhyped or still underestimated. Time will tell. For new value investors who want to bet on AI but don’t want to jump into the deep end just yet, there are some underrated stars that may end up stealing the show.
Shopify stock: Betting on AI assistants in a big way!
Consider shares of e-commerce firm Shopify (TSX:SHOP), which may not be all too far off from some form of AI payoff. Indeed, whenever you have a much-loved product that stands to be made worlds better by adding an AI add-on, copilot, or assistant, there’s a chance to get customers to pay up just a bit more. In this regard, AI is just another value-adding tool that pays itself off.
As Shopify’s management team continues integrating various AI innovations across its platform, I think it’s time to take the firm seriously as a long-term AI player. In prior pieces, I highlighted Shopify’s AI Tools, like Shopify Magic (time-saving features that work, well, like magic!), which helped merchants improve their digital storefronts quickly and easily.
Combined with Shopify’s AI-powered chatbot Sidekick, it seems like the company is making progress toward helping merchants automate more of the technical aspects of running an online store.
Every hero needs a sidekick
Personally, I view Shopify’s Sidekick as a powerful differentiating technology that could help separate the Canadian e-commerce juggernaut from the pack. In essence, Sidekick allows Shopify to flex its large language model (LLM) muscle in a unique way.
Perhaps the most significant source of value lies in the model’s ability to help merchants make decisions to maximize sales and improve efficiencies. In essence, Sidekick combines the best of generative (it’s a chatbot) and predictive AI.
Though only time will tell how large of a role Sidekick plays in the future, I wouldn’t discount the driver’s growth potential. Every superhero needs a sidekick, and Shopify’s Sidekick seems to be making strides toward making every one of its merchants (big and small) more powerful. Given this, Shopify stock is the AI innovator to own for the long haul. At current multiples (69.4 times forward P/E), I don’t think its AI potential is fully priced in quite yet. Perhaps buying on recent post-quarter strength would be a smart idea as we head into Q4 2024.
