The S&P/TSX Information Technology Capped Index, which includes some of the most prominent Canadian tech stocks, has been on a roll. Over the past year, the index has surged by around 34%. Moreover, it has more than doubled in value over the last five years.
Moreover, increasing demand and spending on technologies like artificial intelligence (AI) and digital transformation, as well as the rapid shift toward omnichannel selling platforms, could push tech stock higher in the coming years.
With this background, let’s look at two fundamentally strong Canadian tech stocks to buy and hold for the next decade for above-average returns.
Celestica stock
Celestica (TSX:CLS) is a top Canadian tech stock to gain exposure to the high-growth AI market. While the stock has rallied quite a lot, gaining about 117% and 511% in one and three years, the momentum its business will likely sustain, driving its share price higher.
As investment in data centre infrastructure grows, demand for Celestica’s hardware solutions is set to rise, boosting both revenue and profits. As companies continue to scale their AI capabilities, Celestica’s Connectivity & Cloud Solutions (CCS) division, which focuses on the Communications and Enterprise sectors (including servers and storage), is set for strong growth.
The company is also gaining traction in the networking space, driven by rising demand for its advanced 400G and 800G switches and growth in storage solutions.
Celestica plans to roll out next-generation AI/ML computing programs in 2025, which should further accelerate growth in its CCS business. With a highly favourable demand outlook, this segment is expected to be a key growth driver for both revenue and the company’s stock price.
Beyond AI, Celestica is also gaining momentum in its Aerospace and Defense segment, which continues to grow. The recovery in its industrial business is likely to further support its upward trend in share price.
Shopify
Shopify (TSX:SHOP) is a top Canadian tech stock to buy and hold for the next decade. While its stock has underperformed the broader indices year to date, it is poised to recover swiftly and deliver notable gains as it will benefit from the shift towards omnichannel platforms through its unified commerce solutions.
Despite current macroeconomic uncertainties, Shopify has consistently demonstrated its ability to thrive. The company’s gross merchandise volume (GMV) and gross payments volume (GPV) continue to expand, driving substantial revenue growth. In its latest earnings report, Shopify reported a 21% year-over-year revenue increase, fueled by a 22% rise in GMV, alongside significant growth in GPV.
Shopify’s growing share in the e-commerce sector, innovative tools such as Shopify Payments and Capital, geographical expansion, and addition of new sales and marketing channels bode well for growth and will likely expand its paying merchant base. Further, its ability to attract new merchants, retain revenue from existing ones, and cross-selling opportunities will support its growth. Shopify is also investing in growth initiatives, leveraging AI to enhance its ecosystem, and transitioning towards an asset-light business model, which will help deliver sustainable earnings in the long term and support its share price.
