Artificial Intelligence (AI) has been generating plenty of buzz in recent years and investors have been scouring Canadian stocks for the next great Canadian AI stock. In today’s world, AI is becoming increasingly relevant and consumers regularly interact with AI powered technology.
What is AI? Simply put AI is:
“...a field, which combines computer science and robust datasets, to enable problem-solving. It also encompasses sub-fields of machine learning and deep learning, which are frequently mentioned in conjunction with artificial intelligence.”
IBM is a global AI leader and its roots date back to 1997 when IBM’s "Deep Blue" beat world chess champion Garry Kasparov. Today, IBM's Watson, the world renown supercomputer has evolved into an enterprise AI-driven technology that “gives enterprises the AI tools they need to transform their business systems and workflows, while significantly improving automation and efficiency.”
AI has now become so prevalent that any newly introduced technology worth its value makes use of AI, and the industry will continue to grow exponentially for years to come.
So how can investors take advantage of Canadian AI stocks?
There is no easy answer. If you are invested in data or software-as-a-service (SaaS) companies, than it is likely you already have indirect exposure. Companies like Shopify (TSE:SHOP) and Kinaxis (TSE:KXS) leverage AI within their flagship products.
Another way to look at investing in AI, is to look for companies that are helping others transform their businesses through the use of AI. In Canada, there aren’t too many companies like IBM but there are a couple that stand out.
So what are the best Canadian AI stocks to buy now?
CGI Group (TSE:GIB.A)
CGI Group (TSE:GIB.A) is a global IT-service provider. It is one of the largest tech companies in Canada and operates in more than 40 countries.
While it may not get as much attention as some of its high-flying peers, CGI Group has been an outstanding stock to own. Over the past decade, CGI Group has returned ~400% and has a compound annual growth rate of 17.30%.
Delivering those types of returns over a full decade is no easy feat.
CGI Group dubs itself a “trusted AI expert” in that it helps clients implement end-to-end AI solutions. From identifying opportunities, designing and building AI platforms to implementation and quality improvement. CGI guides clients on their AI journey.
A good example of CGI’s respective expertise, is the company’s recent contract win with the European Space Agency (ESA). In November of 2020, CGI was awarded a contract to “to develop an innovative Artificial Intelligence (AI) enabled platform and a series of solutions for the global satellite communications (satcom) marketplace as part of the Autonomous Satcom Solutions (AUTSS) programme.”
Given its expertise and trusted reputation, CGI Group is well positioned to win similar contracts across a wide range of industries for years to come.
Unlike many SaaS companies which provide industry-specific products, Open Text (TSE:OTEX) is an SaaS giant with products that support a wide range of industries. It is an excellent capital allocator and routinely adds to its impressive portfolio of assets through acquisitions.
Much like CGI Group, OTEX is not a flashy stock but it does deliver consistent returns. It rarely has a down year and has delivered a total return CAGR of 16.37% over the past decade. As an added bonus, it is one of the few TSX-listed Canadian Dividend Aristocrats in the Technology sector. A rare combination of growth and income.
Launched in 2017, Magellan is Open Text’s AI and analytics platform. Magellan offers businesses a “comprehensive set of AI and analytics tools that help enterprises overcome data challenges”. It leverages machine learning algorithms and integrates all forms of data including but not limited to voice, text, and video.
As an open platform, it gives customers the ability to customize their enterprise information management systems. For those looking for quick, out of the box solutions, Open Text also provides preconfigured AI solutions to get companies started on their AI journey.
Both OTEX and CGI Group have proven to be among the most reliable tech stocks to own on the TSX Index. They can be less volatile than the majority of SaaS listed companies, and are attractively valued. As respected leaders, they are well positioned to ride the wave of AI adoption in the years to come.