The artificial intelligence (AI) industry has matured enough that investors can analyze and track many (if not most) stocks based on fundamentals and potential instead of following the hype. However, we are still in the early days of AI, and it’s challenging to predict how this tech sector niche will look in the next five years.
One practical thing to do for investors seeking AI stocks is to keep an eye on the most promising prospects. There are a handful of them in Canada.
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A hardware company
POET Technologies (TSXV:PTK) is one of the most promising AI stocks in Canada right now. The company has a specific niche: combining optics and electronics.
Their most promising product is an interposer that allows electronics and photonic (light signals) to communicate at a basic circuit level. This can be pretty powerful as light doesn’t have the same limitations as electronics have regarding data transmission.
This has applications in numerous areas, including AI, where enormous data processing capabilities are a significant asset. This is also why the company is getting the limelight in the AI industry and has already received multiple awards for recognition.
The result of this has been a strong but inconsistent bull market phase that pushed the value of the company up 360% in 2024 alone. If its technology is integrated into more AI-related hardware or gains traction in any other areas (like the Internet of Things, or IoT), the company might scale up rapidly, and the stock will keep pace.
A customer service-oriented company
Telus Digital (TSX:TIXT), which was previously called Telus International, is a tech company focused on customer experience (CX). The company helps businesses connect with customers across multiple touchpoints and is using AI in multiple areas of its service. Telus Digital also offers AI data solutions.
Since it falls under Telus’s banner, it benefits from the telecom giant’s name and scale (more credibility). The telecom giant even bought back a significant number of shares of the company. But despite being launched during the time of AI hype and a solid endorsement, Telus Digital stock has been underperforming since the beginning.
It’s already trading at a massive discount of about 86% of its inception price and has fallen over 50% just this year. However, this brutal discount might be a blessing if the stock starts gaining traction, and it might as well happen because of the AI segment of its services.
A supply chain company
Kinaxis (TSX:KXS) is one of Canada’s two supply chain/logistics-related tech companies. It was a robust grower in its early days and experienced a rapid surge in the post-pandemic market (riding the sector-wide momentum). But it has been fluctuating since then.
There is decent potential in Kinaxis’s base offering, but the company is significantly enhancing the strength of its solutions and platform via AI. The company claims that its supply chain orchestration platform (Maestro) is currently the only one augmented with AI. It leverages this technology for adaptability and intelligent, data-driven decision-making.
If the users of this platform and other Kinaxis solutions and services start getting outsized results compared to their competitors, the platform may experience a rapid user base expansion, and the stock might start growing at a robust pace again.
Foolish takeaway
None of the three tech stocks can technically be considered pure-breed AI stocks, as the underlying companies adopted AI and were not built around AI.
However, they have found applications in the growing AI market (Poet Technologies) or a way to infuse their core offering with AI to increase its appeal. This might pay off well.
