Artificial intelligence (AI) might be one of the most influential technologies of our era, with the possibility of being implemented across sectors in the future, including healthcare, hospitality, education, manufacturing, and entertainment.
According to a research report by Bloomberg Intelligence, the size of the generative AI market could grow from just around US$40 billion in 2022 to US$1.3 trillion in the next decade, and the consistently “rising demand for generative AI products could add about $280 billion of new software revenue.”
Given these growing opportunities, it makes sense for long-term investors to keep an eye on some cheap AI stocks on the TSX that are well-positioned to capitalize on this trend but haven’t seen much appreciation so far.
In this article, I’ll talk about two such AI stocks in Canada that could deliver strong returns in the coming years: Kinaxis (TSX:KXS) and BlackBerry (TSX:BB).
Kinaxis stock
Kinaxis is an Ottawa-headquartered tech firm that primarily focuses on providing software solutions to improve supply chain management. It currently has a market cap of $4.6 billion, as its stock trades at $160.71 per share with about 8.1% year-to-date gains.
The company’s software solutions utilize AI technology to combine human and machine intelligence, which ultimately enhances supply chain planning on its platform. These solutions help businesses increase efficiency by automating machine learning workflows, supporting confident decision-making with easy-to-interpret visualizations, and offering predictive and prescriptive analytics for more effective supply and demand balancing.
In the first three quarters of 2023 combined, Kinaxis reported a 17.4% year-over-year rise in its total revenue to US$315 million, which drove its adjusted earnings up by 18.2% from a year ago to US$1.17 per share. Despite big gains in the shares of many large AI-focused stocks in the last year, KXS stock hasn’t seen much appreciation, making this Canadian AI stock look cheap to buy for the long run.
BlackBerry stock
BlackBerry is another top AI stock on the Toronto Stock Exchange that you can consider adding to your portfolio right now. This Waterloo-headquartered software firm currently has a market cap of $2.2 billion as its stock trades at $3.79 per share after witnessing 31% value erosion in the last year.
In the post-pandemic era, macroeconomic uncertainties have forced businesses across the globe to cut their spending. This challenging spending environment has affected the performance of BlackBerry’s cybersecurity segment, which is also currently the largest contributor to the company’s total revenue. Nonetheless, as more businesses continue to build their online presence and look to safeguard their data from cyber threats in the years to come, the demand for BlackBerry’s AI-enabled enterprise cybersecurity solutions could strengthen.
Moreover, BlackBerry has recently increased its focus on developing machine learning and AI-powered advanced technological solutions for the automotive industry. The utility of such software solutions is likely to rise significantly in the next decade as more automakers adopt autonomous and electric vehicles.
Less than two years ago, the company also launched the BlackBerry IVY innovation fund to invest in start-ups developing data-driven solutions for the automotive industry, making its long-term outlook brighter. Given these positive factors, I find BB stock undervalued to buy on the dip now and hold for the long term.
