Toronto-Dominion Bank Invests in Artificial Intelligence

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) announced an interesting purchase this week. What company is TD buying and why? Read on to find out.

| More on:

We don’t often hear about Canada’s big banks buying anything other than financial firms, but Toronto-Dominion Bank (TSX:TD)(NYSE:TD) announced an interesting purchase yesterday. TD is spending US$100 million to buy an artificial intelligence firm. Let’s look at the deal and why TD made the purchase.

The deal

TD is buying Layer 6 Inc., a Toronto-based start-up. Layer 6 operates a platform that analyzes data with the goal of anticipating and responding to customers’ individual needs. (Layer 6 will still operate under its own name in its own offices, but it will only do work for TD.) The company is only a year old and boasts merely 17 employees. This makes the $100 million price tag seem high.

However, TD has stated it’s been looking to shore up its AI for a while, which is a good idea in our ever-changing technology environment. Smaller companies can be more nimble when it comes to making quick changes, and the banks don’t want to lose competitive ground. For example, Bitcoin and the cryptocurrency market (which may turn out to be a flash in the pan) currently bypasses all major financial firms. New forms of artificial intelligence could help banks remain competitive and lower costs.

TD’s CEO discussed why he thinks this purchase is so important at an industry conference this week. He stated, “We’ve talked a lot in the past about disruption and what would happen to banks and ‘Are your business models broken?’ and I say, this acquisition is a great example of how TD’s adapting to this new reality and new expectation, and how we are remaining on the leading edge with our customers.”

Investor takeaway

TD is not the only bank with its eye on AI. Royal Bank of Canada and Bank of Nova Scotia have also pledged substantial sums of money to artificial intelligence. TD has the funds to invest, and it bodes well that the bank isn’t waiting to be left in the technological dust by smaller competitors. We’ve talked about other good news for the bank in these recent articles about higher interest rates and U.S. tax reform.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Susan Portelance has no position in any stocks mentioned.

More on Bank Stocks

Paper Canadian currency of various denominations
Bank Stocks

1 Magnificent Canadian Dividend Stock Down 28% to Buy and Hold for Decades

This top Canadian dividend stock is underperforming its large peers this year, but a turnaround could be on the horizon.

Read more »

data analyze research
Bank Stocks

Is BMO Stock a Buy for its 4.8% Dividend Yield?

Canadians are looking to cut back, and BMO stock is on board. But it could also be a top stock…

Read more »

Investor reading the newspaper
Bank Stocks

Is Canadian Imperial Bank of Commerce Stock a Good Buy?

CIBC is a TSX bank stock that has delivered marketing-beating gains to shareholders in the last two decades. Is the…

Read more »

Man data analyze
Bank Stocks

Where Will TD Stock Be in 5 Years?

TD stock is a good consideration for a 5.2% dividend on the recent dip. It provides upside potential, too, but…

Read more »

customer uses bank ATM
Bank Stocks

These 3 Canadian Bank Stocks Are Next in Line to Pop

Let's dive into three Canadian bank stocks that look well-positioned to continue to soar over the long term.

Read more »

a person looks out a window into a cityscape
Stocks for Beginners

Bank of Montreal vs. RBC: Which Canadian Bank Stock is the Better Buy?

Earnings season is upon us, and the Canadian banks will be reporting before you know it. So which of these…

Read more »

stocks climbing green bull market
Bank Stocks

2 Undervalued Canadian Bank Stocks to Buy Now

Here's why investing in undervalued Canadian bank stocks such as BMO and EQB can help you beat the TSX Index.

Read more »

money goes up and down in balance
Bank Stocks

Is National Bank of Canada Stock a Buy for Its 3.4% Dividend Yield?

National Bank of Canada stock has surged over 1,000% in the past two decades, if we adjust for dividend reinvestments.

Read more »