Artificial intelligence (AI) has been one of the major driving forces in the American stock market in the last couple of years. It’s different here in Canada, primarily because we don’t have a tech sector that is as massive and few AI companies of comparable scale.
Still, many Canadian investors are looking into AI stocks, hoping they will catapult their portfolios to new heights. This is a reasonable hope, especially when it’s clear that we are on the cusp of an internet-level transformation, not just of the stock market but of society as a whole.
However, there is too much hype and too many variables regarding AI stocks. The lack of understanding of underlying technologies and excessive use of AI buzzwords is clouding the market, especially for conservative investors. If you count yourself among those, a few predictable tech stocks might be much better picks for you than AI stocks.
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An IT consulting company
CGI (TSX: GIB.A) is one of the oldest publicly traded tech companies in Canada. It started out in 1976 and has emerged as one of the largest IT and business consulting firms in the country, with a current market value of about $35 billion. The company offers a range of services to its clients, but most of them fall under two business segments — managed IT/business services and business and IT consulting.
The revenue mix is far more diversified regionally, with about 47% coming from the U.S. and Canada and the rest from other markets.
From a capital-appreciation perspective, CGI has been rewarding but not very consistent, especially in the short term. It rose by about 44% in the last five years and 294% in the last 10 years. The growth pace has slowed down, but the overall momentum has remained bullish.
A logistics technology platform company
Descartes Systems Group (TSX: DSG) operates in a relatively narrow logistics and supply chain technology niche. Its platform connects a range of stakeholders in global supply chains and has a robust ecosystem of applications. Ironically, AI has been a strong catalyst for improving and enhancing that platform, but it was formidable even before that.
As a growth stock, Descartes is both consistent and potent. It has risen by about 196% in the last five years alone, and its returns in the previous decade are even more impressive — over 850%. The sheer scale of its return potential and the historical consistency of its growth are reasons enough to add this tech company to your portfolio.
Foolish takeaway
The two tech companies may not offer the explosive growth potential of AI stocks, but they also offer far less risk. If we go by their beta values, both are essentially low-volatility stocks, making them far safer and more predictable compared to AI stocks. More importantly, they are stable, long-term picks that you can hold for years, even decades, for promising returns.
