The artificial intelligence (AI) boom caught many investors by surprise over the past year and a half, especially those who are not heavily focused on tech stocks. Big gains have been made in the AI space, and some investors have become rich as a result in a very short time. Nvidia (NASDAQ: NVDA), for example, trades near US$130 per share at the time of writing compared to US$13 less than two years ago.
One option for TSX investors who want exposure to AI growth but are concerned about tech valuations is to buy stocks of companies that should benefit from either using AI to make their businesses more profitable or providing the energy needed to power AI data centres.
Sun Life Financial
Sun Life (TSX: SLF) is a Canadian insurance, benefit, and wealth management company with operations around the globe. The firm recently reported solid second-quarter (Q2) 2024 results with a record $1 billion in underlying net income, supported by growth in Canada and Asia.
Financial institutions should be among the largest beneficiaries of adopting customized AI programs to drive efficiency into their businesses and reduce expenses. On the insurance side, Sun Life can use AI to speed up the analysis and approval of policies and claims. AI programs can also address customer requests to reduce the need for extra staff.
Wealth management and financial services can use AI to analyze customer data to provide product recommendations and improve customer service.
Insurance firms can also harness AI to help identify and prevent fraud.
Sun Life trades near $74 per share at the time of writing. The stock is up about 14% in the past three weeks. A pullback should be expected in the near term, but investors should treat any dips as an opportunity to add the stock to their portfolios. At the current price, SLF stock provides a 4.4% dividend yield.
TC Energy
TC Energy (TSX: TRP) is a major player in the North American natural gas industry, with 93,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity in Canada, the United States, and Mexico.
Natural gas demand could surge in the coming years as firms building AI data centres install on-site gas-fired power-generation facilities. Data centres running AI programs consume large amounts of electricity. Power has to be both reliable and scalable to ensure the computer servers can meet customer needs. There are concerns that existing power infrastructure in some areas will have trouble meeting demand growth from both electric vehicle charging stations and the rising demand from AI data centres. Power grids are expensive to upgrade, and getting the necessary permits for new ones can take decades. Private power generation bypasses these issues.
TC Energy recently highlighted AI-driven demand for natural gas as an opportunity for the business in the coming years. The company said its infrastructure is within 24 km of 60% of the roughly 300 new AI data centres that are currently either planned or being built in the United States.
On the international side, TC Energy’s Coastal GasLink pipelines reached mechanical completion late last year and are expected to start commercial operation in 2025. The pipeline will deliver natural gas from Canadian producers to a new liquified natural gas export facility being built on the coast of British Columbia. Global demand for natural gas is expected to rise due to the need for gas-fired power facilities.
TC Energy has increased the dividend annually for the past 24 years. The company’s existing capital program should provide steady cash flow growth to support steady dividend hikes. Investors who buy TRP stock at the current level can get a dividend yield of 6.3%.
The bottom line on AI opportunities
Sun Life and TC Energy are good examples of non-tech stocks that could benefit significantly from AI. If you have some cash to put to work, these stocks deserve to be on your radar.
