The artificial intelligence (AI) frenzy certainly draws some similarities with past technological booms. Undoubtedly, the past few years of AI trading may be somewhat similar to the rise of the internet boom in the 1990s. While the dot-com bubble eventually went bust, bringing down numerous investors who failed to consider the price paid (valuation) for a business, I think the AI boom can be profitable for the many investors who play the rise of the trend carefully.
Of course, it’s hard to pick the winners and losers from the rise of any emerging technological trend. The nascent rise of AI may stand to make many growth-focused investors a great deal over the near term. That said, today’s biggest AI kings may not be nearly as dominant five years from now.
Further, extended valuations may bake in many years worth of growth. And if things get a tad out of hand, perhaps more than a decade’s worth of growth expectations will be priced right off the bat. Indeed, it’s harder to move the needle on a stock whenever all investors in a name are expecting perfection.
How to bet on the AI trade in Canada without overextending your risk profile
That’s why I think it makes sense to drive in a different lane when it comes to the AI trade. After all, it’s not just a small group of companies that stand to benefit from generational industrial revolutions. Many companies stand to benefit from the AI boom but may not require one to pay all too high a multiple to get in. In this piece, we’ll have a closer look at one stock in Canada that I view as having underappreciated upside potential at the hands of AI.
While the upside from such an emerging technology may not pay off overnight, I think that over the next 10 years, a stage could be set for some pretty impressive gains as managers play the long-term game with their AI strategies and game plans.
Without further ado, meet the following “stealth AI” stocks that I think can fare well in 2024 and beyond, as most other investors crowd into overheated trades that tend to get more coverage from the talking heads.
Thomson Reuters
Thomson Reuters (TSX:TRI) is an intriguing Canadian company you wouldn’t expect to bet on investing so heavily in AI. Undoubtedly, the company recently announced yet another AI initiative, with the announcement it’s expanding its professional-grade generative AI assistant.
Undoubtedly, the move is pretty exciting and could help the popular media and information juggernaut gain an edge over its rivals in the space. Indeed, shares of TRI have been red hot over the past few years, with the stock up more than 59% in the past two years and over 155% in the past five years.
Despite the impressive growth and AI prospects, the stock remains quite cheap at just 26.7 times trailing price to earnings (P/E). That’s not at all a high price to pay for one of the most underrated appreciators on the entire TSX Index.
With quarterly earnings results on tap for early May, I’d not sleep on a name that may very well represent one of the stealthiest ways to bet on the rising AI trend. Given Thomson Reuters’s trusted brand, I have no doubt the generative AI efforts will really begin to work their way into the earnings over the long haul.
