Amid the ongoing AI boom, it’s easy to give in and just buy what’s working, as hype and promise about a productivity surge look to draw investors towards the hottest momentum trades in the market. Indeed, for the past two years or so, it’s been about the semiconductor plays, which have been making a fortune from the great AI data centre buildout.
And while the massive infrastructure buildout is probably just getting started, with gigawatt-sized data centres now in development, it certainly does feel like investors looking to build generational wealth or, at the very least, a really fat TFSA or RRSP nest egg, ought to get in on the action or run the risk of being left behind. It’s hard to resist the temptation of FOMO sometimes, even when volatility strikes fear into the hearts of some speculators who were only investing in momentum for a quick gain.
But, at the end of the day, I do think that sound investment in AI with value in focus can tilt the risk/reward in one’s favour. In other words, you don’t need to chase or speculate to participate in the great multi-year run in AI and AI-related stocks.
By understanding the business behind the theme (AI and data centres), one can value a firm and perhaps punch a ticket when shares are going for a price that’s well below intrinsic value. It’s harder to find a margin of safety with such AI names on the way up. But with volatility recently hitting the broad tech scene, I do think there’s an opportunity for self-guided stock pickers to buy up the attractive AI investments as they pass on the speculative names that probably deserve to be hit with a bearish correction or worse.
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Kinaxis: A Canadian play on agentic AI
In Canada, one name that I’d add to the watchlist is Kinaxis (TSX: KXS). It’s not a firm that’s spending ridiculous sums on capital expenditures on the AI effort. And it’s not doubling down on data centres or engaging in circular financing. Rather, it’s one of the firms that’s using AI to create value. Indeed, ROI (return on investment) has been the talk of the town when it comes to AI of late amid the staggering amounts of cash that U.S. hyperscalers are sinking into the cause.
In terms of AI-added value, we’re talking about practical cost savings and optimization. When it comes to Kinaxis, the firm is putting AI to work in meaningful ways. With the Maestro agentic AI platform and the ability to move above and beyond the seat-based pricing model, as agents look to hit the ground running, I do like the trajectory of Kinaxis, even though the stock has been “stuck,” fluctuating, ultimately moving 6% lower, in the past five years.
Indeed, supply-chain management seems like a job best done by a machine, and Kinaxis is already putting the tech to work in the trenches. As agentic capabilities look to rise, I wouldn’t count the Canadian tech sensation out of the game, especially as investors move beyond the so-called SaaS-pocalypse fears. Given Kinaxis’ data advantage and agentic tailwinds, I find the 27.9 times forward price-to-earnings (P/E) multiple to be more than reasonable.
