While the TSX hosts some artificial intelligence (AI) stocks with growth potential, the fastest-growing AI companies primarily trade on U.S. exchanges and on other foreign markets. Interestingly, since 2005, Canadian investors have faced no restrictions regarding the number or weighting of international stocks held within their registered tax-advantaged accounts. This freedom, which extended to Tax-Free Savings Accounts (TFSAs) at launch in 2009, allows investors to explore the global market for the best AI stocks to enhance their registered accounts and improve tax efficiency in their retirement portfolios.
Generally, the types of investments permitted in a TFSA are the same as those in a Registered Retirement Savings Plan (RRSP).
Two AI stocks that could potentially increase your TFSA’s value include the Canadian supply-chain powerhouse Kinaxis (TSX: KXS) and an exchange-traded fund (ETF), CI Global Artificial Intelligence ETF (TSX: CIAI), which instantly diversifies your account’s AI stock holdings.
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Kinaxis: A Canadian AI stock turning a new leaf after quadrupling revenue
Kinaxis is a highly regarded supply-chain software vendor that harnessed AI and machine learning (ML) to power its flagship, cloud-hosted RapidResponse concurrent planning platform as early as 2018. Under the leadership of John Sicard, the company quadrupled its revenue, tripled its market value since 2016, and more than doubled its loyal customer base in the past three years.
The company recently announced a new AI-infused modern supply-chain orchestration platform, the Maestro, to a positive reception. Four new customers, including Japan-listed Brother Industries and CMI Foods, have signed on to Maestro since July. Given the shorter sales cycle, the company could accelerate towards its annual revenue growth target of $1 billion. Kinaxis currently expects to grow sales by approximately 14.5% to more than US$490 million in 2024. Financial analysts estimate the company will achieve 18.2% revenue growth next year.
Previously focused on building a stellar supply chain planning platform repeatedly ranked as a category leader by market analysts at Gartner, Kinaxis is transitioning from a building focus to an “accelerating growth” mindset. The company has decided to retire its long-serving chief executive officer, Sicard, and its chief sales officer is leaving after a five-year tenure.
The company’s strategic shift towards rapid growth could unlock capital gains on Kinaxis stock, potentially enriching investors’ TFSAs. However, the market is eager to see how Kinaxis plans to accelerate its sales growth rate and whether it can sustain its robust operating earnings and free cash flow margins while doing so.
Meanwhile, Kinaxis stock appears undervalued, with a forward price-earnings multiple of 34.2 and a forward price-earnings-to-growth (PEG) ratio of 0.7.
Diversify TFSA holdings with CI Global Artificial Intelligence ETF
Investing in AI stocks may require significant research and careful consideration of portfolio weightings. Investors may opt for a curated portfolio of approximately 40 AI stocks created by professionals at CI Global Asset Management.
CI Global Artificial Intelligence ETF is an actively managed ETF offering exposure to global stocks that stand to benefit significantly from their role in advancing AI worldwide. Top holdings include Nvidia stock, which comprised 12.44% of the $569 million portfolio as of August. Apple stock followed at 10.3%. However, the portfolio seems heavily concentrated in a few large AI stocks, with its top 15 holdings comprising 82% of the portfolio recently. This concentration is understandable, as a handful of well-positioned tech companies dominated the early stages of the AI race.
Launched in May of this year, CIAI ETF is still promoting its offerings to Canadian investors and has waived a portion of its annual management fees from 0.55% to 0.20% for a limited time. Investors may pay as low as $2 per annum per every $1,000 invested. The ETF’s management expense ratio has not yet been established, as the fund is still in its early stages.
