I may not be a big momentum chaser, but whenever a Canadian tech name more than doubles in a year, it has to grab your attention. Indeed, Canada isn’t as well known for its high-flying tech stocks, especially compared to the U.S., but the ones that know how to innovate have enjoyed meteoric rises over the years.
Undoubtedly, Shopify (TSX:SHOP) is the e-commerce sensation that tends to steal the spotlight. With shares of SHOP blasting off following a strong quarter, the firm now commands a nearly $250 billion market cap and could make a run for that title of Canada’s largest company. Indeed, it would be nice if a tech stock were to be on top of the TSX Index again. Either way, it hasn’t been all smooth sailing for Shopify or the Canadian tech plays in recent years.
Though Shopify is a fantastic name to keep tabs on as it looks to pick up where it left off before its devastating crash a few years ago (I can’t believe how quickly the firm got back on its feet from the implosion), I think Canadian investors should consider what else the tech scene has to offer.
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Celestica stock corrects after blowout year
Enter shares of Celestica (TSX:CLS), which are up 244% in the past year and 89% year to date, despite recently correcting just over 13% from its high. The lesser-known electronics manufacturing service (EMS) provider is starting to grab the attention of everyday retail investors. It’s now a $29.1 billion business and one that has some remarkable artificial intelligence (AI) tailwinds at its back. Like Shopify, Celestica is a name that even U.S. investors have been talking about of late.
To put it simply, Celestica is a play on the AI infrastructure boom, given it’s behind the equipment necessary to fuel the data centre demand surge. Indeed, growth has been in overdrive of late. And while demand could beget even more demand and even higher revenue growth (Celestica seems to have hit an inflection point of sorts), investors should be cautious, given AI sentiment seems to be shifting again.
The AI trade is getting overheated, but don’t bet against Celestica
Indeed, the latest MIT study, which pointed out that 95% of AI initiatives are generating zero profits, may be concerning. But the big takeaway, I believe, is that most such bets haven’t yielded profits yet. Of course, there are high hopes that AI will have a big payoff. And while it’s hard to tell when it’ll arrive, I think that investors shouldn’t bet against the continued AI revolution, just because many firms have opted to spend first and tailor use cases later.
Who knows? The shifting of the gears could bring forth a major uptick in profitability, which could add to the longevity of this bull run. Either way, I’d view any pullback in CLS shares as a buying opportunity, given its important role to play in the boom, which I view as a long-term boom that will be met with plenty of corrections, even bear markets, along the way.
Celestica may be dwarfed by Shopify, but it’s quickly becoming one of Canada’s larger and most influential tech companies. It’s one worth adding to the radar.
