TSX’s technology sector is outperforming in 2024 and is doing slightly better than the Nasdaq Composite in the U.S. year-to-date, +23.1% versus +22.2%. NVIDIA, the acknowledged artificial intelligence (AI) king, is the top draw across the border.
Some investors regret missing out on NVIDIA’s meteoric rise to being the world’s most valuable company in November 2024 (US$3.6 trillion market capitalization). However, Canadians shouldn’t have the FOMO feeling because $1,000 is enough to invest in three domestic stocks with visible growth potential. You can buy the AI stocks at much lower prices today and hold them for decades.
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Niche player
Computer Modelling Group (TSX: CMG) is at the top of my list. The $989.6 million software and consulting technology firm is a niche player in the energy industry. It provides oil & gas companies with simulation software and uses AI-backed data analytics to help improve productivity and enhance oil recovery.
In 2023, the company acquired Bluware-Headwave Ventures (BHV). The software and services company specializes in cloud and interactive deep-learning solutions for sub-surface decision-making and seismic interpretation. CMG started as a research institute before developing advanced reservoir modelling capabilities and providing its market-leading reservoir simulation software.
The portfolio has expanded with the addition of BHV as a second operating segment. Moreover, the CMG 4.0 strategy aims to accelerate software revenue with leading sales organizations while cementing the company’s leadership position in the new energy industry. At $12.09 per share, current investors enjoy a 20.9% year-to-date gain on top of a modest 1.7% dividend.
Scaling the business
Sylogist (TSX: SYZ), a $245.6 million software-as-a-service (SaaS) company, caters to non-profit entities and the public sector. Its SaaS solutions use Microsoft Dynamics 365. Furthermore, its Power Platform modernizes finance, fundraising, and administration to improve operational efficiency. The current share price is $10.52 (+41.5% year-to-date).
According to its CEO, Bill Wood, Sylogist focuses on high-value SaaS Annual Recurring Revenue (ARR) growth. It is well-positioned to scale the business, generate higher margins, create operating leverage, and drive free cash flows.
In Q3 2024 (three months ending September 30, 2024), SaaS revenue increased 13% year-over-year to $29.2 million, while bookings climbed 14% to $8.7 million compared to Q3 2023. Wood added that the increasing balanced pipeline growth and bookings are encouraging signs for Sylogist.
Communication technology
Sangoma Technologies (TSX: STC) flies under the radar but rewarded investors with massive returns in 2024. At $8.85 per share, the year-to-date gain is an eye-popping 108.7%. Had you invested $1,000 at year-end 2023, your money would have been more than double today.
The $296.8 million company provides communications-as-a-service (CaaS) products for businesses. It boasts a cloud, hybrid, and on-premises communications platform with reliable in-house solutions together with network and security services.
Sangoma aims to drive innovation in communication technology. In September 2024, the company launched the @ASKSangoma, an AI-powered knowledge Bot for quicker customer support. Market analysts- 12-month average price target is $11.10 (+25.4%).
Major AI players
CMG, Sylogist, and Sangoma Technologies are excellent choices if you want exposure to significant, legitimate players in the AI space. All three companies have long growth runways ahead.
