Most investor attention is rightly being placed on U.S. artificial intelligence (AI) stocks, given the size and importance of these companies to the global arms race, which AI appears to be trending toward. However, for investors looking for more under-the-radar picks in this sector, there are a few Canadian AI players I’ve long thought are undervalued relative to their global counterparts and look outwardly attractive at current levels.
Let’s dive into three top such players in the market right now and why these stocks are worth paying attention to (or adding for those investors seeking top growth stocks) right now.
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Kinaxis
Supply chain management and automation company Kinaxis (TSX: KXS) has seen strong revenue growth in recent years, which has led to a recent stock surge of more than 12% over the course of the past 12 months, as shown in the chart below.
The company’s strong fundamentals are driving this growth, with increasing consumer adoption of the company’s flagship RapidResponse platform driving Kinaxis’ premium valuation.
Kinaxis is profitable, but at a price-earnings ratio of around 150 times, it’s certainly not the cheapest option out there. The thing is, long-term investors looking to capitalize on rising demand from AI-driven solutions underpinned by strong growth in the supply chain management space have reason to keep buying. For that reason, this remains a top pick on my list of Canadian AI stocks to consider right now.
Coveo
One Canadian AI stock I haven’t touched on much (but probably should have) is Quebec-based Coveo (TSX: CVO). The company specializes in AI-powered digital experience solutions for major clients such as Adobe (NASDAQ: ADBE) and Salesforce (NYSE: CRM).
As a leading purveyor of its AI-powered solutions to these major global tech players, Coveo’s software platform, providing AI-powered search and relevance opportunities at the enterprise level, should continue to garner a premium multiple. Similar to the other players on this list, the reality is that investors will need to pay up for this growth today.
Despite producing a net loss this past year, the company expects its revenue growth to accelerate to the 15% level from around 6% last year. That’s good enough to justify the near-50% return investors have seen over the past year.
Of the three stocks on this list, objectively, Coveo is perhaps my most compelling pick. Those looking for an overlooked AI growth stock in this environment may want to take a closer look at this name.
Shopify
Shopify (TSX: SHOP) continues to be one of my top growth picks for long-term investors, particularly those who are seeking exposure to the mega trends in e-commerce and online shopping.
That said, Shopify has also become a major AI integrator, utilizing AI to improve its underlying e-commerce platform growth. As more enterprises (particularly on the larger end of the spectrum) gravitate toward Shopify’s one-stop-shop model, this is a company I think could have plenty of growth cycles for investors to look forward to in the decades to come.
Again, this is another expensive stock, but investors get what they pay for. In my view, investing in companies like Shopify that are enhancing their offerings with meaningful AI improvements is where most of the value is likely to be accrued in this space over the long term.
