Why Canadian equities are poised for a rebound

Another reason for the relevant gains of US equities over Canadian equities is artificial intelligence. If we use a baseball analogy to communicate where we are with this theme, we’re still in the batter’s box waiting for the umpires to arrive. The speed of AI technology adoption is without comparison — and we’re only just beginning to get a glimpse at the potential for the productivity enhancement it promises. Investors would be unwise to assume the share price gains around AI we’ve had to date are fleeting.

We’ve identified 3 categories of exposure companies have to AI:

1. Direct exposure
2. Enabling or facilitating AI gains 
3. Companies that help constitute the infrastructure that either enables or benefits from AI growth 

The Canadian company with the most obvious direct exposure is Shopify. The crown jewel of its toolset is Shopify Magic, an assistant that auto generates product descriptions and removes a barrier to e-commerce growth. It also offers a retailing assistant called Sidekick. Sidekick knows all of Shopify’s capabilities — and all of its commerce data in general. This allows it to assess a merchant’s content, help improve its quality and productivity, and accelerate sales. 

CGI is an example of a company in the second category. It’s expected to be an early beneficiary of the demand generated by its institutional clients eager to show progress in AI themselves. CGI has the skillset and relationships to assist in that AI transition. 

On the infrastructure side, we have the Brookfield Group of Companies. It has always managed to position itself well for major transformational themes. It recognized quite early that we’re in a once in a generation investment cycle for data and digitization related to AI computing. Brookfield estimates the need for over $1 trillion of investments over the next 10 years, to deploy data centres to ensure there will be sufficient infrastructure for growth in AI related data consumption. To learn more, read The Once-in-a-Generation $1 Trillion Opportunity You Won't Want to Miss Opens in a new window..

Mix an impending demand for energy and materials with a number of Canadian firms positioned to take advantage of AI, and it may be time to get excited about Canadian equities again.

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