Artificial intelligence (AI) has been the big story in the markets for nearly two years after the launch of large language model AI programs introduced the general public and businesses to the powers of the technology.
Investors who missed the rally in chip stocks and other tech names at the core of the AI boom are wondering where they can still find value in stocks that will give their portfolios exposure to the expansion of AI over the coming years.
One option is to look past the tech names building the gear and search for TSX companies that will see growth in demand for their products rise as a result of AI use or ones that will be able to harness the power of the technology to drive more efficiency in their businesses to boost future profits.
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Manulife
Manulife (TSX: MFC) is a Canadian insurance company and financial services provider based in Canada with operations around the globe. The company has been investing heavily in technology in recent years to streamline the insurance business to provide better and faster service to its retail and corporate clients. The adoption of AI enables the company to take these changes much further and can have a profound impact on both the insurance and wealth management operations.
Manulife is using AI to enhance customer service through chatbot and automated call summarization. It is also testing programs that provide automated portfolio analysis and investment insights. The firm can use AI to analyze its client data to make tailored product recommendations and identify risks. The company is well known for its insurance operations, but it also has a large wealth management business that operates under the John Hancock brand.
Manulife is up nearly 50% in the past year. The company reported solid second-quarter (Q2) 2024 results and continues to pivot the business to lower-risk segments focused on delivering high returns. At the current share price, investors can get a dividend yield of 4.5% from MFC stock.
TC Energy
TC Energy (TSX: TRP) recently identified AI as a potential driver of growth in the coming years on an anticipated surge in demand for natural gas. The energy infrastructure giant operates 93,000 km of natural gas pipelines and has roughly 650 billion cubic feet of natural gas storage capacity across Canada, the United States, and Mexico.
Natural gas might not be the first thing that comes to mind when investors think about AI, but the fuel could be core to the growth of the AI industry. Data centres that run AI programs consume significant amounts of electricity, and there is a risk that existing power infrastructure won’t be able to handle the demand. As a result, companies that are building the data centres are looking at on-site power generation to ensure reliable power supply. Gas-fired power production is viewed as the most viable option in many cases.
In its Q2 2024 earnings report, TC Energy says that its infrastructure is located within 24km of 60% of the approximately 300 data centres in the United States that are currently planned or under development.
TC Energy trades near $61 per share at the time of writing. The stock is up more than 25% in the past year but still sits well below the $74 it reached in 2022. Investors who buy TRP stock at the current price can get a dividend yield of 6.3%.
The bottom line on AI stocks
Manulife and TC Energy are good examples of non-tech stocks that should benefit from AI in the coming years. If you have some cash to put to work, these stocks deserve to be on your radar.
