Since the launch of OpenAI's generative artificial intelligence (AI) tools in late 2022, many people in the world have seen the transformation AI is capable of bringing to several industries. While generative AI technology has rapidly gained huge popularity across the world, it's important to know that AI tech is not just limited to generating text, images, or videos.
Beyond the flashy headlines, AI has the potential to quietly transform several industries, including agriculture, energy, information management, and logistics, right here in Canada. While most investors are busy chasing global giants, a few lesser-known Canadian companies are leveraging AI in ways that could deliver outsized returns. And the best part is these Canadian AI stocks are just getting started, meaning there is massive potential for investors who act now.
In this article, I'll highlight two top Canadian stocks harnessing AI in innovative ways that could deliver solid returns for early investors.
OpenText stock
OpenText (TSX:OTEX) is the first Canadian AI stock investors can consider buying now and holding for years to come. This Waterloo-based software and services firm currently has a market cap of $10.7 billion as its stock trades at $40.38 per share with 27.5% year-to-date losses.
The recent weakness in OpenText's revenue growth could be the main reason for its underperformance in 2024. The company's total revenue for the September 2024 quarter declined by 11% YoY (year over year) to US$1.27 billion due to its divestiture from the application modernization and connectivity business. However, after adjusting for this divestiture, the decline was just 1.8% YoY, showing that OpenText's core business remains resilient.
It's important to note that OpenText is integrating AI tech across its product portfolio to improve efficiency, decision-making, and customer outcomes. For example, its Business AI solutions harness the power of AI to provide its customers with intelligent tools that simplify complex processes and unlock actionable insights from massive data sets. As the demand for its advanced tools continues to grow, OpenText stock could stage a sharp recovery in the coming years.
Kinaxis stock
While OpenText's focus on AI-driven enterprise solutions makes it an attractive stock to buy now, it's not the only hidden gem in Canada's AI space. Another company worth considering right now is Kinaxis (TSX:KXS). This Ottawa-headquartered company has a market cap of $4.7 billion as its stock trades at $168.57 per share with 13.4% year-to-date gains.
Earlier this year, Kinaxis announced that over 55% of its patent portfolio is now dedicated to AI and machine learning innovations, highlighting its focus on making its supply chain management solutions more useful and valuable to its customers. With AI-powered tools like Dynamic Demand Sensing, the company allows businesses to anticipate demand fluctuations by analyzing both internal and external factors in real time.
Such innovative solutions could give Kinaxis an edge over the competition in an increasingly complex world of supply chain management, which could accelerate its financial growth trends in the coming years and drive its share prices higher.
