Forget about shares of Constellation Software (TSX:CSU) for a moment. Shares of the Canadian software giant have been really rolling over lately, sinking close to 3% in Monday’s session in what appears to be a bearish turn that could see the name make lower lows in the coming weeks and months. In such a fantastic year for the Canadian stock market, you don’t need to settle for less-than-stellar exposure to a long-time momentum name that investors have recently begun to sour on.
Whether it’s the rise of AI and the impact on the software consolidation business, founder Mark Leonard’s departure many weeks ago (which inspired a super-negative move in the share price), the still sky-high share price, or the difficult-to-value traditional metrics on the name, you don’t have to be a buyer of the dip in the long-time darling turned colossal year-to-date underperformer. Was Mark Leonard really like the Canadian Warren Buffett? Maybe, maybe not. Regardless, investors should be ready and willing to invest in a company, regardless of who’s at the helm.
At the end of the day, the passing of the torch can inspire negativity, perhaps excessive negativity, but still, long-term investors should be fully aware of the risks that come with investing in a person rather than the company itself.
While I do think the recent plunge is a shocker, especially for a stock that’s been considered by many as a “smart beta” stock for such a long time, exhibiting minimal volatility compared to the solid gains (the beta is still low at 0.87), I do think that there is absolutely no shame in taking a raincheque on the latest dip in shares of CSU. Is it too hard and tricky to assess as a number of concerning headlines and headwinds weigh?
Then feel free to put it in the too-tricky category! You don’t need to invest in a long-time darling that has since experienced a changing of the tides. So, if AI has you questioning the width of the economic moat going into 2026, don’t feel any shame to ring the register on the name. At the end of the day, many tech stocks are working in this environment. And many of them are still cheap with the AI tailwinds at their back.
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What’s working amid the AI boom?
You don’t have to look far for AI-driven tech titans that are gaining ground. Shopify (TSX:SHOP) and Celestica (TSX:CLS) are huge winners on the year, and guess what? They could be big winners again in 2026, especially as AI tailwinds strengthen and their management teams double down on the trend. Celestica’s in an enviable spot after winning big in the third quarter as it flexed deals with mega-cap tech. Indeed, dealing with the hyperscalers seems to be a great way to get noticed, power quarterly results, and bring forth a wave of investor enthusiasm.
At writing, shares of CLS are up over 81% in three months. Meanwhile, SHOP stock is up close to 40% in three months, and could make a big splash in the first half of next year, especially as e-commerce continues getting more of a chatbot-driven update. Either way, Shopify and Celestica have profound AI tailwinds and might be worth considering if you’re at all uncertain about Constellation at this trying time.
Personally, I’m unsure of the Constellation story and would rather pay a fatter premium for a proven AI winner. Further, I don’t even view CSU stock as a cheap stock at over 85 times trailing price-to-earnings (P/E). Based on that metric, it’d probably be better to pay a higher multiple for a better-performing AI gainer.
