Is POET Technologies a Top AI Stock for Canadian Investors?

Canada has relatively few AI stocks, and the ones it has are different from American AI stocks in terms of performance. But there are some promising prospects.

Adam Othman

Adam is a value investor who is always on the hunt for fantastic undervalued companies that he can share with Motley Fool readers. He follows Warren Buffett and Charlie Munger's investment advice and has completed the Canadian Securities Course. When he's not investing, Adam can usually be found traveling or skiing.

Published November 7, 2024 10:00 am EST

| More on: PTK

The tech sector in Canada, while vibrant and containing a few global industry leaders, is dwarfed by giants like financials and energy, which collectively make up a bit less than half of the S&P/TSX index’s weight.

We also don’t have any major names in the budding artificial intelligence (AI) industry, and most Canadian AI stocks are essentially tech stocks that have incorporated AI in their business models or product/service offerings.

However, Canadian investors still have solid AI investment choices. The number is limited, but stocks like POET Technologies (TSXV:PTK) can be powerful AI picks for Canadian investors who want to invest locally.

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor. — Source: Getty Images

The company

POET Technologies is not a pure-breed AI company. In fact, its crucial technology originally had nothing to do with AI. The POET Optical Interposer (which is a trademarked technology) is a device that allows for electronic and photonic devices to be mounted and used together on a single module.

Electronic devices like phones and computers rely on electrical signals to transmit and process data. Photonic devices like LEDs and photovoltaic cells (solar panels) work with light instead. Light can be a powerful mode of data transmission, as we know from optical fibres. Light signals do not drop or are impacted by other electromagnetic signals and waves around us.

This is what POET’s optical interposer allows for. They can help convert data from electric signals to light signals to be transmitted via optical wires.

Incorporating these interposers can allow for higher data transfer bandwidths, lower loss, and simpler cooling needs, especially within a data centre. This makes it a powerful “facilitator” technology for AI, where massive amounts of data need to be processed and transmitted.

The AI connection

The company is already being recognized as an essential player in the field of AI. It has received multiple AI-related awards just this year. Its hardware has achieved multiple AI-related milestones, like 1.6 Terabit per second throughput, which is considered cutting edge right now and is relatively rare in the market. The company claims to have schematics for four times this throughput (6.4T).

Simply put, POET Technologies offers solutions that can help AI companies and stakeholders supercharge their computing power, often at a relatively lower cost. If these solutions become more commonplace and the company starts seeing significant demand, it may experience a decisive bull market phase. It is already doing remarkably well and has grown over 300% in 2024 alone.

Foolish takeaway

POET Technologies is easily one of the top AI stocks available in the Canadian markets right now. And it isn’t too bold to say that it is gaining momentum. If its technology is as transformative as many experts are predicting and it becomes the optical standard in the AI computing market segment, it may jump from microcap to at least mid-cap in the coming years.