As the tech trade looks its shine with various retail investors (the rotation to value seems to be on!), it might be time to give some of the less-loved names a closer look while they continue to lead the S&P and Nasdaq lower. While the TSX Index has since begun to drag its feet of late, thanks in part to a cooling-off in that red-hot banking trade, I think that the greatest mispricings may very well lie within the hardest-hit tech names.
Of course, AI is still sprinting ahead, whether or not we’re paying as much attention to it. And even though other headlines have been bigger of late (most notably the selling pressure and geopolitical fears), I continue to think the tech and AI trade is the place where longer-term (think the next five years or more) investors will want to be. But, of course, it’s hard to buy dips, especially when it seems like things can always get worse for the names on the receiving end of all the negative momentum.
While the near term will always be a mystery, the price of admission for a long-term position in the following pair of stocks, I think, is starting to get favourable. And as a long-term value investor, that’s really the most you could ask for. So, instead of trying to time a bottom in tech, it might be time to start seizing the deals that exist today, even if it means running the risk of missing out on steeper bargains next week.
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Shopify
Shares of Shopify (TSX: SHOP) are on the mend in recent weeks after taking a vicious hit to the chin in January and the start of February. Even if Shopify is on the right side of agentic AI (it’s the disruptor, at least in my view), investors just don’t seem all that willing to pay up a growth multiple anymore. Now, if there’s a growth stock that deserves a rich premium, it’s Shopify. But in this climate, perhaps a somewhat less-obscene premium is the new line in the sand.
As for just how much Shopify should go for in an era where tech is no longer the hot trade remains a big question mark. The next few quarters could prove rocky, but the long-term trajectory, I think, looks as promising as ever.
And if Shopify’s agentic advantage can deliver (arguably, AI is already showing early signs of moving the needle), I wouldn’t be surprised if SHOP is right back to new highs, with a frothy multiple that, suddenly, investors are more than willing to pay for again. Immediately up ahead, margins could be in a bit of a soft spot, even as revenue marches higher.
The tailwind of AI search
Just how much of this is already priced into SHOP here is a question investors must ask themselves. Personally, I think it’s already baked in and would look for an AI surge to power a top-line surprise. Just how much firepower will AI searches have on revenue growth? We’ll find out. Either way, I wouldn’t bet against Shopify as it finds itself in a good spot in the AI wars.
Shopify president Harley Finkelstein said that AI searches are bringing in massive traffic to the magnitude of 15 times compared to the start of last year. That’s big. And I think the real upside comes from what happens once more consumers warm up to AI as it gains a sense of agency. Either way, I wouldn’t dare bet against SHOP stock now that the tides are turning once again.
