How to Invest in Canadian AI Stocks for Long-Term Gains

If you’re looking for top tech stocks, these AI stocks are certainly ones to consider for long-term gains.

Amy Legate-Wolfe

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. Before joining Motley Fool Canada, she 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. Follow Amy on LinkedIn and Canada Stock Digest. 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 December 20, 2024 9:00 pm EST

Investing in artificial intelligence (AI) stocks offers an exciting opportunity for long-term gains, particularly as this transformative technology becomes deeply embedded in every industry imaginable. From healthcare to logistics and beyond, AI has the power to revolutionize how businesses operate.

As a long-term investor, your focus should be on stocks leveraging AI for growth while maintaining strong financial health and a clear strategic vision for the future. Let’s explore the best Canadian AI stocks and their potential to deliver value over the long term.

The letters AI glowing on a circuit board processor. — Source: Getty Images

Descartes

When it comes to Canadian companies excelling in AI, Descartes Systems Group (TSX:DSG) is an exceptional example. Descartes provides cloud-based logistics and supply chain management software, utilizing AI to optimize and automate critical processes like route planning, delivery scheduling, and real-time tracking.

In its latest quarterly earnings, Descartes reported a 14% year-over-year increase in revenue to $607.7 million, along with a 23.4% rise in earnings. These figures reflect the growing demand for AI-driven solutions in global logistics, especially as companies strive for efficiency in increasingly complex supply chains. With supply chain disruptions becoming more common in recent years, Descartes is well-positioned for sustained growth.

Celestica

Another standout Canadian AI company is Celestica (TSX:CLS), a global leader in hardware platform and supply chain solutions. Celestica integrates AI into its manufacturing processes, using predictive analytics to enhance efficiency and reduce waste. The AI stock’s efforts have paid off significantly, with 22.3% year-over-year revenue growth to $9.2 billion in its most recent earnings report.

Celestica’s success is rooted in its ability to cater to high-demand sectors such as renewable energy, healthcare, and aerospace – all of which are increasingly reliant on AI-driven solutions. This diversified approach ensures that Celestica remains a robust player in the AI landscape.

OpenText

Of course, no discussion of Canadian AI stocks would be complete without mentioning OpenText (TSX:OTEX). OpenText is a global leader in enterprise information management, using AI to help organizations manage, analyze, and protect vast amounts of data.

Recent earnings revealed that OpenText continues to experience robust growth in its cloud business, with AI serving as a core component of its offerings. The AI stock’s acquisition of Micro Focus further strengthens its foothold in the AI and cloud ecosystems, thus enabling it to expand its portfolio and enhance its competitive edge.

What to watch

If you’re looking to invest in AI, it’s important to understand the broader trends driving the industry. The adoption of AI is accelerating, with companies in almost every sector recognizing the potential of this technology to improve efficiency, reduce costs, and create new revenue streams. In Canada, government support and private sector investment in AI research and development create a fertile environment for AI stocks.

Yet long-term investors should also be mindful of the risks and challenges associated with AI stocks. While the potential rewards are substantial, the AI industry is still evolving, and competition is fierce. Smaller companies, in particular, may face volatility as they work to prove the viability of their business models. Diversification is crucial to managing these risks.

Another important aspect of investing in AI is timing. While it’s tempting to dive in during moments of hype, seasoned investors know that the best opportunities often come during market pullbacks. The recent dip in tech stocks, for example, could present a chance to buy into solid companies like Descartes, Celestica, and OpenText at more attractive valuations.

Foolish takeaway

The future outlook for AI stocks, particularly in Canada, is incredibly optimistic. As AI becomes increasingly integrated into daily life, the demand for innovative solutions will only grow. AI stocks like Descartes, Celestica, and OpenText are well-positioned to capitalize on this trend, offering investors a compelling mix of stability and growth potential.

Altogether, investing in AI stocks for long-term gains requires a combination of careful research, strategic diversification, and a commitment to staying the course. By focusing on financially sound companies like Descartes Systems Group, Celestica, and OpenText, you can position your portfolio to benefit from the ongoing AI revolution. With strong track records, innovative approaches, and bright future outlooks, these Canadian AI stocks are an excellent starting point for any investor, especially those looking to capitalize on one of the most exciting trends of our time.