Canadian investors should look to profit from the generative artificial intelligence boom now that prices on certain stocks have come down a bit. And not all AI investments are in the technology industry.
Actually, most companies outside the tech scene have a lot to gain from AI.
Here, we’ll look at two indirect ways Canadians can profit from AI, thanks to the increased demand for energy that’s come with AI. All those data centers hog a lot of power from the grid.
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‘AI stocks’ are more than tech stocks
As more data centers are becoming equipped with AI in mind, global demand for energy could easily continue climbing from here. Transmission companies, power producers, and more utility-like firms should all become trickle-down AI beneficiaries.
And their valuations are much more reasonable than pure-play AI tech stocks, especially if you’re in the market for a cheap investment that also yields fat dividend yields.
These two utility stocks may be great bets for safety and perhaps a hint of secular tailwinds. Although I wouldn’t call them AI plays, per se, I do think that new AI investors looking for safety and stability should consider these stocks this October.
Fortis stock
First up, we have tried and tested utility play Fortis (TSX: FTS), which boasts one of the stablest cash flow streams out there. Indeed, the low beta (0.23 at the time of writing) entails a lower degree of market risk. And though the stock has been hot of late, rising more than 11% in the past three months alone, I still view the 4.13%-yielder as a great pick-up if you seek dividends and a way to weather any potential volatility that could be in the cards in the fourth quarter.
Apart from doing its part to fuel rising energy demand, the company is also primed to benefit from what could be much lower interest rates. As you know, lower rates will allow Fortis greater financial flexibility to pursue growth projects that can keep the dividend growth record going strong.
So, whether you’re an AI investor who’s looking to rotate into more of a defensive play or a near-retiree looking to lock in a high yield before the Bank of Canada cuts rates again, FTS stock seems like a bargain at just 18.65 times trailing price-to-earnings (P/E).
Hydro One stock
For investors seeking rock-solid stability and an absurdly wide moat, there’s Hydro One (TSX: H), which some investors may consider a monopolist of sorts. The utility firm commands a pretty fat premium, with shares trading at 23.5 times trailing P/E at writing.
And though the 2.87% dividend yield isn’t as high as historical norms, I do think the recent pullback of 8% is worth getting behind if you haven’t initiated a position already. With a strong second quarter in the books, AI investors who’ve neglected the defensive part of their portfolios may wish to punch at a ticket at just shy of $44 per share.
