Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong return opportunity.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 22, 2024 9:45 pm EST

Emerging artificial intelligence (AI) stocks can be some of the most compelling investment opportunities today. These companies often combine cutting-edge technology with rapid growth potential, making them appealing to those looking to capitalize on future trends. AI is transforming industries such as healthcare, logistics, and manufacturing, allowing businesses to operate more efficiently, reduce costs, and improve customer experiences. Investing in these companies allows you to ride the wave of a technological revolution that is far from reaching its peak.

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

Why AI stocks

What makes AI stocks particularly enticing is their adaptability. These companies leverage AI to solve diverse challenges. This flexibility not only creates a resilient business model but also positions these firms to capture future market opportunities.

Another key advantage of investing in AI companies is their potential for market disruption. Such innovations can redefine industry standards, giving early investors an edge. Moreover, AI companies are often leaders in data utilization, which is crucial in today’s economy. So here are some top options.

Descartes

Take Descartes Systems Group (TSX: DSG), for instance. Specializing in software-as-a-service (SaaS) solutions for logistics, Descartes has experienced significant growth, with quarterly revenue up 14% year-over-year to $607.7 million. The tech stock boasts a robust profit margin of 21%, reflecting its operational efficiency.

Its recent quarterly earnings growth of 23.4% is a testament to its ability to leverage AI to optimize global supply chains. With a forward price/earnings (P/E) ratio of 45.7, Descartes may appear pricey. But its focus on innovation and sustainability makes it a long-term winner.

WELL Health

In contrast, WELL Health Technologies (TSX: WELL) focuses on healthcare, offering digital health solutions powered by AI. Its recent quarterly revenue of $251.7 million marked a 23% increase compared to last year, signalling its ability to scale operations effectively.

While the tech stock reported a loss of $81.2 million in its last quarter, WELL’s management emphasizes growth. It is now aiming for an 8.7% annual revenue increase over the next three years. With shares up 12% in a single week, WELL is demonstrating that the market values its disruptive potential in a rapidly evolving industry.

Celestica

Celestica (TSX: CLS) adds a manufacturing edge to the AI conversation. With staggering 22.3% year-over-year quarterly revenue growth to $9.2 billion, it’s clear the tech stock is thriving. Celestica’s AI-driven solutions are integral to its ability to meet global demand across industries like aerospace and industrials.

The tech stock’s strong return on equity of 21.2% and diluted earnings per share (EPS) of $4.41 underscore its financial strength. At a forward P/E of 20.6, Celestica offers both value and growth – thus making it a strong candidate for investors.

Foolish takeaway

The long-term outlook for these companies is promising. As AI technology matures, the scalability and profitability of these firms are likely to improve. Descartes’ low debt levels and strong cash flow ensure it has the resources to invest in further innovation. WELL Health’s focus on expanding its digital footprint could make it a leader in global health tech. Meanwhile, Celestica’s diverse revenue streams provide stability and room for growth.

Investing in AI stocks like WELL, DSG, and CLS is a bet on the future of technology and its ability to transform industries. While risks exist, such as high valuations or competitive pressures, consistent growth and innovative strategies offer compelling reasons for long-term investment. As AI adoption accelerates, these tech stocks are well-positioned to lead. They are excellent options for those looking to combine growth potential with exposure to transformative technologies.