The AI revolution has powered the broad stock markets to some impressive gains, but if you’re overinvested in Canadian stocks and have limited exposure to the U.S. names, you might not have enough exposure to the mega-cap titans that are leading the so-called AI boom.
Of course, many investors have valuation concerns, especially regarding AI plays that defy the laws of gravity. While time will tell how the investing boom ends, I think there are risks on both the upside and the downside that investors should consider. Indeed, if there is a painful valuation reset in the AI-exposed names, the losses could be severe.
However, at the same time, if AI does lead to productivity growth, one could trail the market by leaps and bounds by not having enough AI at the core of a portfolio. Indeed, AI stands out as one of those revolutionary themes. And while the road will be bumpier, it’s still worth riding out, especially if you’re a young Canadian investor who prioritizes capital appreciation.
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Apple
First up, we have shares of Apple (NASDAQ: AAPL), a firm many regard as lacking in AI. And while the firm might not catch up in the large language model (LLM) race anytime soon, I think it’s unwise to think that Apple can’t profit deeply from AI, as it balances strategic partnerships with its own innovation.
There’s a ton of work to be done to improve the user experience, especially on the Siri side of things! Either way, I do think the AI offerings (including the ones behind the curtain of intriguing features such as Live Translation) in the Apple walled garden will grow over time.
In any case, Apple stands out as one of the most defensive AI plays in the Magnificent Seven right now. It’s not poaching AI talent with obscene pay packages, nor has it been talking up AI as much as other firms out there, at least since the initial (and rocky) launch of Apple Intelligence. And that’s a good thing, should the AI trade run off a hill at some point.
In any case, the firm is seen by some as a “toll collector” of sorts on the AI freeway. And that makes the tech titan a great pick for investors who value profitability above narratives and AI bull-case scenarios
Personally, I think Apple is a steady ship in the AI waters. And that could be the right way to sail, especially as valuations, expectations, and all the sort soar as the bull market marches onward. In the meantime, I think the latest iPhone 17 is a hot seller that can keep driving AAPL higher.
Shopify
Shopify (TSX: SHOP) is another AI play that’s a fit for Canadian investors who aren’t looking to invest south of the border. Indeed, Shopify stock has been more volatile of late, but if you’re okay with the wilder ride and the lofty 2.7 beta, I think the e-commerce firm is a must-own.
Indeed, the world of e-tail is changing amid AI. And it’s changing in favour of firms like Shopify, which will allow merchants to sell goods via AI models. Indeed, Shopify is a global e-commerce disruptor that’s quickly becoming a must-own, regardless of which side of the border you reside.
The stock isn’t cheap, so investors should buy on the way down. With shares down close to 8% from recent highs, now might be a good time to start an initial position. Just don’t buy all at once! Ideally, adding to a position at less than $175 per share could be a good idea for those fearful that volatility could get the better of them over the near term.
