The Canadian Investor - 50 Ways to Invest in the AI Revolution - Part 2

Episode Date: September 29, 2025

Simon and Dan return with the second half of their deep dive into 50 Ways to Invest in the AI Revolution. While Part 1 covered the obvious giants—semiconductors, hyperscalers, pure-play AI softw...are, enterprise apps, and data center REITs—this episode looks at some of the less obvious but equally important beneficiaries of AI. From utilities and grid infrastructure to commodities like uranium, copper, and natural gas, they explore the backbone powering AI’s massive energy demand. They also dig into healthcare, cybersecurity, IT consulting, and industrial automation—sectors where AI is already improving efficiency, margins, and innovation in ways most investors overlook. Once again, they highlight dozens of companies and ETFs across these subsectors, balancing both the opportunities and the risks. If you’re wondering how to get diversified AI exposure beyond the usual suspects like NVDA and MSFT, this episode is packed with fresh angles and ticker ideas. Tickers discussed: Utilities & infrastructure: NEE, CNP, D, CPX.TO, BEPC, BIP.UN.TO, PWR, MTZ, SU, ENB Commodities & energy: TECK.B.TO, TOU.TO, URA, U.UN.TO, UNG, ZEO.TO, BCIM Healthcare: GEHC, SMMNY, PFE, ISRG, WELL.TO, ZHQ.TO Cybersecurity: CRWD, PANW, HAK, CYBR.TOConsulting & IT services: ACN, IBM, INFY Industrial automation: ROK, ABB, PNG.V  Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.  See omnystudio.com/listener for privacy information.

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Starting point is 00:01:24 Welcome to the Canadian investor podcast. We are back for our second part of of the How to Invest in AI episode. So if you miss the first episode, make sure you go back on to Monday. I'm not quite sure the exact title it would be, but just go to our previous episode and this will be part one. Just as a recap here, we're looking at ways to invest in AIs, typically obviously in the stock market,
Starting point is 00:01:50 so different kind of companies that will be AI plays to various degrees, different angles of looking at it. We're looking at more infrastructure plays that would, benefit from AI build out and other types of things. So in the first episode here, we went over semiconductors and the hardware. We went over hyperscalers. We went over pureplay AI software models. We went over enterprise software. And then we finish off with data center reeds. And now we will kick off the second part here. Again, we will be providing a whole lot of different ideas. It's not investment advice. Make sure that any of the names,
Starting point is 00:02:30 or ETFs that we mentioned, you do your own research and diligence. I think in the first episode you'll probably have noticed, we put a lot of caution out there because I think we'll just reiterate how there's a lot of hype around AI. But having said that, not to rehash the first episode, how would you want to invest in AI if you want to build, if you want to bet on the grid build out, so the power build out and transmission infrastructure? sure. Yeah. So in this situation, like ultimately AI can't really move forward without kind of the backbone that powers it, which would be for the most part electricity. I know we'll go over kind of the commodity side of things as well. And I would argue that this episode is more so the lesser known aspects where like the first episode we kind of went over the more obvious ones where where this episode would kind of be more of the things you probably knew, but you know some industries that you might have not. known about and you know electricity. There's a few that are a bit more on the obvious side still
Starting point is 00:03:31 left. Yeah. But yeah. Yeah. I mean, obviously when everyone thinks of AI, they're probably thinking of the NVIDIAs, you know, the hyperscalers, the semiconductor companies. The utility companies, however, are expected to benefit a lot from this because obviously, you know, a lot of AI leads back to data centers, and data centers obviously consume a ton of power. And I would argue that right now we're kind of, you know, it's only been out for a couple of years, but we are in the infancy of artificial intelligence. And according to the Energy and Institute department from Penn State, data centers already consumed 4.4% of U.S. electricity in 2023. And when did GPT come out? That was, it was probably 2020. That would have been late, no, late 2022.
Starting point is 00:04:20 late 2022. Yeah, I'm pretty sure it came out as FDX was blowing up and Bitcoin was going into the gutter. Yeah. Pretty sure that was around the time. So, I mean, you got to think that's 4.4% of U.S. electricity in 2023. And this is when the large scale rollout happened. And many have stated this could go as high as 12 to 20% over the next five or six years. And Blackstone had actually mentioned that AI could drive 40% growth in electricity demand over the next decade.
Starting point is 00:04:50 So what this means for utilities is there will be a need to a upgrade the transmission lines they currently have to kind of keep up with the capacity. And the other addition there is building new ways to generate power, whether that be renewables, whether that be nuclear, whatever it may be. Gas powered. Gas powered. All that type of stuff. And the thing is like building out the electricity grid is one thing. But obviously electricity costs. money. And as a result, these companies are kind of going to do whatever they can to improve efficiency at all costs. So large scale energy usage means large scale energy costs. So even slight upgrades to infrastructure to kind of reduce consumption overall can bring on meaningful margin expansion and ultimately more profits. So some companies in this space will be, and again, I didn't write the tickers, but we will throw them in the description.
Starting point is 00:05:50 Again, would be Next Era. We have Quanta, Dominion Energy, and a Canadian name, obviously, because this is the Canadian investor podcast, would be something like Capital Power. I know Capital Power had a pretty big run-up because they do operate a lot here in Alberta, and I know there was some data center expansion plans here, and Capital Power was supposed to supply a lot of the power. I think it's, you know, kind of dipped a bit from that, you know, peak levels it was at, But, I mean, it's not just U.S. players in this space.
Starting point is 00:06:22 There's a lot of Canadian utilities that could potentially benefit. But there are a lot of different subsections in this regard. Like, you have the companies that actually supply the physical power, like capital power, Dominion. They're kind of, I guess, you can say. Like a Brookfield Renewable. Yeah, Brookfield Renewable. And we've seen it. Brookfield Renewable, you know, the case of a lot of companies trying to get to carbon neutral as well, has added.
Starting point is 00:06:48 a lot of contracts with the hyperscalers. I believe it's Microsoft and Alphabet. Yeah, Microsoft. Yeah. So not only is that in an effort to reduce emissions, but also in an effort to keep up with this capacity, like the demand overall. And you could argue that Brookfield is probably the only renewable player with the large enough scale to handle a lot of these deals.
Starting point is 00:07:11 I mean, they're gigantic in relation to renewable power companies. But the ones that generate the power are kind of. you know those those picks and shovel type companies i mean we talked about that with the semiconductor companies like the ones who are actually supplying the power are going to get paid based off that power demand and then you have companies like quanta or mastech that kind of go out upgrade the infrastructure build the substations all that type of stuff and then you can even dig a little bit further to the equipment providers like the people who are providing the switch the switch gear circuit breakers all this type of stuff to these data centers,
Starting point is 00:07:48 to the substations, things like that. So Schneider, Siemens would be companies like that. Yeah, Schneider. Yeah. So a lot of that major switch gear, those are very niche companies. Like there's not a lot of companies that supply that type of stuff. So I think it's interesting here because utilities are often thought of as like low volatility,
Starting point is 00:08:06 kind of low returning plays like bond proxies for the most part. But they kind of have a growth story attached to them now, especially the ones kind of have. exposure to these data center buildouts. A lot of them are much more expensive than they would typically trade because of this forward potential. But yeah, it's definitely, it's a different aspect in the utility space right now. And I think a lot of it is fueled from this. Yeah. Yeah, exactly. And I mean, especially if we get a market correction, you could find these companies becoming very attractive in terms of multiples. So it's something I have quite a few
Starting point is 00:08:42 Quanta Schneider Electric on my watch list. If the multiples can come down a little bit because clearly these are not, it's not the, you know, we're not the only people talking about that. So it is like somewhat known that these companies should be benefiting from an AI boom here and just electrification in general if we're talking, thinking about also EV adoption continuing, although, you know, obviously some of the mandates are going away in Canada and I think the U.S. as well. But I think it's safe to say that at least hybrid and EVs in 10, 15 years, there's probably going to be a greater share of vehicles on the roads that will be IV or hybrids. So
Starting point is 00:09:23 these companies should benefit from that from the power generation standpoint on top of the AI story. Yeah, the only difference I guess here would be like this is kind of a slow moving. Like it's not necessarily easy to scale electricity demand. So I mean, that's that's that's that's probably going to be like these are plays that for me it's it's the 10 plus year yeah you're talking long term yeah yeah yeah it's capital intensive and it just doesn't happen overnight whereas a lot of the you know let's say the pure play AI software companies i mean they can scale revenue at a 30 40 50% clip you're probably not going to see that with these utilities like it's it's kind of a slower rollout but it's it's probably a rollout that is is almost inevitable in terms of
Starting point is 00:10:10 electricity demand. That definitely does not mean stock returns will be positive, but the demand is, I think it's something that's going to happen for sure. Yeah. And another thing that you didn't mention, but obviously when it comes to utilities and some of these other companies that we mention is most of them are pretty mature companies and utilities obviously will pay dividends. So if you're looking for income, this is definitely an option that you should be looking at in terms of utilities and still benefit from the AI boom again i think the growth and the upside potential is probably not as high but you're going to probably have less volatility in these name than you would some of the names that we mentioned the last episode and even some of the names we'll be
Starting point is 00:10:54 talking a bit later on in this episode so there are some trade-offs but again especially if you're thinking about utilities maybe not like a schneider or quanta but the utilities the valuations are not that bad. You're not looking at valuations that are that stretch. So in terms of going forward returns, I think there is some arguments to be made that they should be pretty decent compared to when you look at what was it Palantir, trading a hundred time, whatever sales. You know, you need to be very rosy about the Palantir's future to think that you'll be getting really good returns over the next five to ten years where these companies, as long as well, as they execute pretty well, they should provide some reasonable returns, maybe even slightly
Starting point is 00:11:43 market beating. Yeah. I mean, if you look to a company like capital power over the last five years, I think it's up close to 200%. It's definitely done very well. The vast majority of that was, you know, in recent times due to the the potential for the power supplies in that regard. But, and I mean, it only trades at 19x earnings. So it's, it's not necessarily an overly expensive market, but I also do believe it's probably the, I don't want to say the lowest upside, but probably the least flashiest. So I mean, a lot of the market isn't going to flood into these. If you're looking for AI exposure, not a lot of people are going to flood into utilities based on like a 10 to 15 year demand for electricity rollout. So yeah, they just haven't
Starting point is 00:12:29 been as crazy, but there's definitely tailwinds there for sure. Yeah, exactly. I guess the biggest downside for them is you always have to make sure with utilities that the debt is probably structured. We saw that with Algonquin power where they really missed a mark on how they structured their debt and they had to cut the dividend and then the stock has been not doing all that great for a couple of years now. So just keep that in mind. That's always something you should check with utilities. Do you keep hearing about these all in one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their
Starting point is 00:13:07 flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value same smart diversification all in a single ETF. Whether you're just starting out or simplifying your portfolio,
Starting point is 00:13:25 BMO all-in-one ETFs make it easy to invest with confidence. Just zad it and forget it. Considering ETFs like ZEQT, BMO's all equity ETF, or ZGRO, BMO's growth ETF. So now let's move on to another way to play it that's a bit more indirect commodities. So there's three that really come to mind here, natural gas, uranium and copper. And I'll explain why, because you talked about the grid build out.
Starting point is 00:14:00 Well, if you need the power grid to be built out, you're going to. need these commodities. So it's that simple. Another way to play it is the commodities, like I mentioned, to build out that power infrastructure. And there's no way around it. AI uses a lot of energy. And there's a reason hyper-scalers are signing these massive deals like we talked about with Brookfield Renewable, but they've also signed other deals with other power generate producers. A way to play I is looking at the commodities that will benefit from how power on great AI is and these are the commodities that you'll be able to benefit on. And the way to play it, I think, you know, there are some companies, obviously, they'll be the producers, but I think
Starting point is 00:14:43 ETFs are also very attractive solutions. So if you're looking at uranium, the global ex-uranium ETF, ticker URE, gives exposure to uranium miners and companies that produce nuclear components. The Sprott Physical Uranium Trust, U-S.U-N.TIL, holds physical uranium in licensed facilities. So that would be a pure play you're betting on the actual commodity here. And why uranium, if you're not aware, uranium is used for nuclear power. And clearly there's a more desire in Canada, US, and even Europe to kind of come back to nuclear power, realizing that especially if you're looking at zero emissions, nuclear power is a very good option. Yes, it does generate some nuclear ways, but I think for the most part, I think people are realizing that the tradeoff
Starting point is 00:15:33 is definitely worth it. And with the advancement that we've had in the last couple decades with nuclear power plants, they're much safer than they used to be. Of course, the problem with nuclear is you get an accident and then it makes headlines and it makes people bearish on nuclear power for a long period of time. But it's definitely something to keep in mind because it is the top way of producing power uninterrupted and clean. You cannot get that from renewable power. And you can get that from natural gas or other types of carbons, fossil fuels, but they do produce some greenhouse gases. Pretty much the most efficient way, is it not? But it's like a lot of it is I mean, been viewed as as dangerous, but yeah, I mean, obviously we're looking when you have this
Starting point is 00:16:26 amount of demand and people are already worried about emissions overall global warming, things like that. And you have this like large scale demand for power. I mean, the way you're producing it is definitely going to have an impact. I don't really play the commodity market like solely like through ETFs like buying actual commodities. But I mean, if you're definitely, as you had mentioned, you don't, I wouldn't say the producers in a way are all that good of an option if you're looking to just benefit from the general demand of these commodities. I mean, they are, but they also producers tend to go boom, bust more so than the underlying commodities.
Starting point is 00:17:04 So, yeah, but there's, there's pretty much, there's pretty much ETFs that'll track all of these, like in isolation. Yeah, most of them are futures ETS and that's what I was going to mention with natural gas here where the Sprott Physical Uranium Trust is really they will hold it in license facilities. So you're really more tracking the spot price. So that's that's not very common to say the least for commodities ETF. Now the second way here, natural gas. There could be natural glass producers like a terminal line in Canada. So ticker TOU listed in Toronto. There are funds that track the price of natural gas like UNG, but most will be futures base. So keep that in mind.
Starting point is 00:17:47 If you're looking for an ETF for producers, you'll have to go the energy route. It's pretty hard to find natural gas producer ETF specifically. But one that comes to mind from our sponsor, BMO, is the Quoweight Oil and Gas Index ETF, ZETO. I think that's a great option if you're looking for a Canadian one, but there all are tons of. There's other Canadian ones or some US ones as well if you're looking to get diversification down south here. Copper, obviously copper is used. use heavily in anytime there's economic expansion, to be honest, but building out the electrical grid, you know, as a former, well, I guess an electrician, former not practicing. I don't know how to
Starting point is 00:18:31 call it, but it is something that is used very commonly. And the play like tech resources, tech dashb.tio would be a very interesting play, especially if the recent merger announcement goes through. I guess the federal government is pushing back. I think I saw something in the news that the minister that's overseeing that was saying that she'll need to be convinced that it's in the best interests of Canada. So we'll have to see whether. Yeah. They want Anglo, I think, to move their headquarters to Canada. Or they said they might reject it. But yeah. Yeah, those are two huge, like I'm pretty sure they'd be one of the biggest copper producers in the world of those two merged for sure. Yeah. And look, and like natural gas, ETF's tracking copper will be mostly futures-based. And
Starting point is 00:19:21 one that is interesting, but still futures base, is the standard physical industrial metals basket ETF, BCIM. So it tracks the prices of aluminum, copper, zinc, lead, and nickel. So that is actually not a bad basket if you're trying to bet on the demand for building the power grid, because a lot of these would be used for building the power grid. So that's an interesting one. And just to get back to natural gas, the reason why natural gas would be a way to play it is you're really banking on that power generation. So natural gas, yes, it does create some greenhouse gases, but it is the cleanest fossil fuel if you're looking to generate power and have sustainable power, not have downtime like you would for wind and solar, for example. And even hydro. Hydro is not consistent power all the time,
Starting point is 00:20:18 because when it gets very dry, oftentimes it gets more difficult to produce electricity. So natural gas is a way, is a easy way. And obviously, we're seeing it with Europe and across North America, it's an easy way to generate power. And these plants will typically be able to be built much faster than nuclear plants. So it could be a good stop gap until nuclear power plants are built. And if I remember correctly and feel free if we have some engineers listening, you can convert plants that use coal to natural gas. It's not that difficult to do the conversion as well. Yeah, I would have no idea on that. That would be, that's far above my grade of expertise. But yeah, I mean, natural gas is, I mean, there's a tradeoff, obviously.
Starting point is 00:21:08 you have emissions, but it's also, it's fairly easily accessible as well. And the, you know, the plants are relatively easy to build and run, whereas nuclear is kind of a different option there. But that was one thing when you were talking about this. I was kind of looking for a basket ETF in Canada. I couldn't really find one. Like for there is like a basket commodity ETF that kind of holds, but it holds like gold, silver, platinum.
Starting point is 00:21:34 So it wouldn't really, this is probably the closest if you want like that build out. ETF, especially aluminum, like a lot of people don't know, there is a lot of aluminum in these substations and electrical grids as well, because copper is very, very expensive. So there is some situations where they use aluminum as well. Okay. No, that's good. And yes, I double check and you can convert relatively easy depending on the type of conversion that you're doing to convert a coal plant to a natural gas one. So if countries are looking to make those, plants more environmentally friendly. Definitely natural gas is a much better option than coal here. Now, another way here is healthcare. So another way to invest in AI would be investing in
Starting point is 00:22:22 healthcare companies. Healthcare is quietly becoming one of the biggest beneficiaries of AI. So some large healthcare companies are using AI for diagnostic, imaging, and drug discovery. You can think of companies like GELCare, ticker G-E-H-C, Simmons Health-E-E-H-E-E-H-N-E-E-H-N-E-E-H-E. That's how you've... Health-N-Ears. Yeah. So the ticker, this is a pink sheet, so over-the-counter ticker,
Starting point is 00:22:47 because I think they're listed in Europe, and it's S-M-M-N-D-Y. So there's a pink sheet, or if your broker allows you to invest in Europe, there are some European tickers, too. Pfizer, ticker P-F-E, in the U.S., Intuitive Surgical, ISRG, it's another company that's been embedding AI in its tools, more specifically, using it to enhance the results of its robot-assisted surgical system. And in terms of ETF, you'd have to go the diversification route here,
Starting point is 00:23:17 which will include companies that might not be using AI as extensively in their operation. But I do like ZHU from BMO here, since it's equal weight U.S. healthcare, but there are a bunch of different ETFs that you can. could play to just kind of get that basket approach and capture the overall health care, lack of better words, like, you know, usage of AI. Yeah. Yeah. I mean, in terms of a Canadian company, I was kind of digging through here. The only one I could really think of is a company like Well Health. So they just recently took a majority position and heal well AI. So they kind of have systems in place to utilize AI to kind of help diagnose chronic diseases.
Starting point is 00:24:02 rather than manually doing them human-wise. I mean, they have systems where clinic communication is kind of operated through AI rather than, you know, calling in and actually speaking to humans, communications through clinics, things like that. So that would improve efficiency in a certain regard. And I think a lot of these healthcare companies are, I mean, the vast majority of them are going to be slower growing mature companies. So, I mean, if you can find a way to increase profit. through AI, it kind of brings back a particular amount of growth element to them. So I read an article that stated the majority of healthcare firms, around 54% of them that
Starting point is 00:24:42 implement degenerative AI into the company as they're already realizing positive ROI from that spend after the first year of implementation. So that's kind of what I had mentioned in the last episode, that there is some particular industries that are actually reaping the benefits already. And the thing is here is like vast majority of these companies generate a large amount of free cash flow. So it wouldn't put a ton of strain on them financially to fund a lot of these programs for the growth, especially if they're turning profits from them a year later. I think this is probably one of the most underlooked spaces in regards to like AI advancements. I mean, especially in terms of like surgeries, diagnostics, things like that.
Starting point is 00:25:28 And especially when you're going into a U.S. space where it's very for profit, anything they can do to grow margins are going to do. And I think this is going to be one segment where they, where they easily can. Yeah, exactly. And again, I think we did a healthcare episode not too long ago. Healthcare is still not like not extremely favored by investors right now. So it could be one of the areas where you can get some exposure to AI and actually, you know, paying a reasonable price for the kind of profits and growth that you may be looking at. So something to keep in mind. I was just looking at intuitive surgical and it's still expensive, but it's facing quite the
Starting point is 00:26:12 drawdown, to be honest. A lot of healthcare companies are. Yeah. So over the last year, it's facing a 29% drawdown for intuitive surgical. Again, I want to stress, it's still trading at V-sales, looking at the, uh, trailing 12 months around 16 and then priced earnings trailing 12 months 60 and price of free cash flow around 78. So not cheap, but bargain compared to some of those of more like pure AI plays. Yeah, like a lot of these companies are very profitable, generate a ton of free cash flow and are,
Starting point is 00:26:48 I mean, I would imagine the whole drawdown through a lot. Like I know Pfizer has faced a massive have drawn. I think a lot of that was kind of due to the lower, the lower demand. Like, yeah, they kind of overshot the demand that the COVID vaccine would have like moving forward. It really hasn't been all that good whatsoever. So like I, I would say these companies in relation to AI are kind of like utilities. It's not going to be an instant, you know, it's not going to turn these businesses into growth machines or anything like that. It's, it's probably going to be a slow rollout, but there's definitely going to be a lot of ways that they can improve efficiency and kind of boost margins of which they, a lot of them already have very high margins.
Starting point is 00:27:31 Yeah, exactly. So boost margins have a better product, develop drugs faster, that are actually better. So there are a lot of things that come out of health care. And it's often overlooked, but something to think about. Now, the next one here, I would say it's a bit more of a direct place or we're back at a little bit more in the direct side. So cyber security. So this one, clearly AI is a great tool, but let's not get ourselves. Like cyber attacks are definitely using AI to make those attack more effective. And firms like CrowdStrike, Ticker CRWD, and Palo Alto Networks, ticker PANW,
Starting point is 00:28:11 they're really building AI-driven system to detect and prevent cyber attacks in real time. So they they're definitely leveraging that. As the AI adoption accelerates, you know, there will be more demand for next generation protection. Like, companies are not stupid. They need to protect themselves. And that should continue being a tailwind for them. They should see some massive tailwinds from AI adoption,
Starting point is 00:28:34 both as a threat, but also as a tool to combat that threat. The biggest risk for the companies in my view and feel free to let me know whether you agree or not is can they grow into their valuations that are currently, still very elevated elevated. The other one is as the attacks get more and more sophisticated, what happens? And we saw that happen. I can't remember which company it was. I don't know if it was CrowdStrike. I think it may have been them where they really got some reputational harm done because what happens if their offerings gets a massive breach and then the client no longer trust their solution going forward. So that is a definitely an issue that could that could be real, right?
Starting point is 00:29:24 Like if there's a massive cyber attack and the company was using CrowdStrike, for example, and CrowdStrike was supposed to be able to prevent that and they weren't able to. So keep that in mind. In terms of ETFs, there's quite a few of them. There's the I-Share cybersecurity and tech ETF, ticker I-Hack, I-H-H-A-K. Yeah. It's a good ticket. It's not bad. Yeah. And there's the evolved cybersecurity ETF, CYBR, if you're looking for a Canadian hedge version. So there's a few different options there. There's also some other companies, but obviously it's not an extensive list that we're doing. Yeah. So on the cybersecurity front, like security spending is definitely growing. It's grown at a double digit compound annual growth rate since 2020. And many expect this to continue to actually. get higher in the future. Some are actually mentioning 14% compound annual growth rate over the next six to seven years. Another element here is, I mean, once we collect all of this data, like large
Starting point is 00:30:29 amounts of data, particularly if it's related to customers, like personal data in any sort of way, it becomes even more vital to protect it. Yeah. Because obviously, that's a good point. Yeah, like when you get breaches like this and it contains any. any sort of personal data where customers can be financially impacted, anything like that. I mean, you need security to protect it. And obviously, like you had mentioned, I mean, as fast as AI is evolving right now will be as as cyber attacks evolve, arguably even faster than a lot of these security companies can handle.
Starting point is 00:31:05 So it's going to be an interesting segment of the market. And another element here, and I think this is kind of in respect to the difficulty and like the complexity of a lot of this stuff right now is years ago companies would just hire internal teams to handle cybersecurity. The reality now, like it's way too complex and they're often being outsourced. So 65% of budgets like for cybersecurity are now outsourced
Starting point is 00:31:37 so only around 35% of budgets are being spent on internal cybersecurity systems. I couldn't find any data like, what it was say 20 years ago, but the only thing I could find like consistently is the fact that spending externally is going up quite a bit. And I mean, you can tell this just by a trend of how many the growing market cap of these cybersecurity companies and how much, how many more are popping up. But I mean, obviously as technology advances, it's going to be much more important to have this data protected and have your systems protected. So definitely tailwinds, like undeniable tailwinds for these companies, but as you had mentioned, and I feel like we're saying
Starting point is 00:32:18 this, not every segment, but almost every segment, like a lot of them are, are fairly pricey right now and have a lot of growth currently priced in. I mean, I think it goes back to part one of this two-parter is just, there's a lot of hype around AI right now. And I think it's just really important to remember, as exciting as it may be, you always have to ask you, will it be, ask yourself, will it be a good investment? So I think that's always the question to ask here. Do you keep hearing about these all-on-one ETFs lately?
Starting point is 00:32:50 Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single ETF. Whether you're just starting out or simplifying your portfolio, BMO all-in-one ETFs make it easy to invest
Starting point is 00:33:16 with confidence. Just ZED it and forget it. Considering ETFs like Z-E-Q-T, BMO's all-equity ETF, or Z-GRO, BMO's growth ETF. Speaking of outsourcing, you like that transition?
Starting point is 00:33:34 Good transition, yes. Consulting in IT services. So not every company will build IT or AI solutions in-house, a bit like you mentioned for cyber security. Actually, a lot of larger companies actually choose not to and they actually do not do it in-house because it's just not their core expertise.
Starting point is 00:33:53 So they prefer to outsource it to companies that specialize in IT services. I saw that firsthand, my previous employer. We were about 1,500 employee. So not a small company, like pretty big. And they had an IT department, But a lot of the IT related work and AI, as obviously the last couple of years, AI was starting to be integrated a bit more. It was done by these IT services company.
Starting point is 00:34:21 And you're essentially investing in the adoption layer of AI here rather than betting on a single winner in the AI model race. In other words, you're betting that more and more companies will implement AI into their operation one way or another, regardless of the sector. So I think this is a really interesting way to play it. And to do that, many of them will need a firm to help them with that process. So some of the names that are pretty well known in that space are Accenture, ticker ACN, IBM, ticker IBM, and then InfoSys, ticker I-N-F-Y. There's going to be other names as well. But these are some of the names that you could play in terms of betting on consulting and IT services.
Starting point is 00:35:04 I think Accenture is the larger one, maybe IBM, that's the one that I'm the most familiar. That's the one that my former employer was using. Yeah, I don't know this space very well at all. But I mean, I think it again goes back to increased complexity would mean increased outsourcing. I would imagine to specialize companies. I mean, it's going to be a trend that continues across a wide variety of areas, especially when we get into tech. Yeah, and I'm just looking here, just for fun.
Starting point is 00:35:37 So these, I didn't realize, but Accenture, and I haven't followed the company all that closely, so just keep that in mind. But it's not looking that expensive. So I don't know if there's something else happening with the company, obviously, as always, just make sure you do your due diligence here. But essentially, over the last year, it's almost 40% drawdown. It's trading at a P, a trailing P of 18.9. has price earnings growth of 2.5, which is not too bad. So the PG ratio, not too bad for a company in that
Starting point is 00:36:11 space. Price of free cash flow on a trailing basis of 14.4. So, I mean, definitely one of the cheaper plays we've seen so far the day in terms of valuation. Like I said, I don't know if there's some underlying issues that we're missing here and obviously do your due diligence. But I just happened to look at it and was a little bit surprised at how much, how cheap it was compared to some of the other companies we talked about. Yeah, I can't even really comment on it because I have no idea what they do. Like what exactly do they do? Well, they'll, they'll be brought on as consultant, right? So they'll be implementing some efficiency. Whether it's new enterprise software, efficiency, like they'll, they'll be there to help with the.
Starting point is 00:37:03 implementation. That's essentially what I witness. Yeah. I'm sure there's a whole bunch of different things. But yeah, they, they definitely will help companies do some transformation projects related to IT. So a bit surprised, but maybe I, like I said, we, there's so many names here. I haven't had the chance to dug into a censure, but I'll probably put it on my watch list now that we're talking and just dig into a bit more because I'm, I'm one to be a bit more of a contrarian. And when I see some a bit more value. I get intrigued. It's definitely rare to find a bargain these days. Yeah. Yeah, exactly. So now the last one here to round it out feels like a long episode, but probably not for those listening because we broke it down in two-parter, but for those wondering, so we've recorded
Starting point is 00:37:51 so far probably around like we're going to have recorded like close to three hours today. So it is you're starting to get sick. I'm dodging cold and flu viruses from my daughter and wife. So hopefully I'm not going to get sick, but I love doing the podcast and recording, but three episode in a short amount of time, it does take a whole lot of brain powers. I just wanted to mention it. It weighs on a guy, yeah. Yeah, exactly. Especially if you're fighting a cold, then it really drains you. But we'll finish here with industrial automation. So this is simply companies that will be, like it's using robots, sensors, AI, and software to make manufacturing and industrial processes faster, safer and more efficient.
Starting point is 00:38:35 Probably going to cost a lot of jobs over time, unfortunately. That is the sad reality of things. So instead of relying heavily on human labor for repetitive and dangerous task, companies can deploy automated system that can run 24-7 with very high precision. Another example is they'll use AI for, like for example, to predict when maintenance is required. Because downtime, if you're a manufacturer, downtime can be very costly. So if you can minimize that downtime with AI, it can be very valuable for a company. And some place in this space would be Rockwell Automation, Ticker ROK, and ABB, Ticker ABB.
Starting point is 00:39:20 So this is not a space I'm as familiar with, but clearly they are using AI quite a bit. So something to look at in terms of valuations, let's just pull out. Rockwell. I'm kind of curious now after looking at Accenture to see what it's looking like. So it's not cheap, but trading at around on a trailing basis, 40 times earnings, 29 price to free cash low. So not the cheapest thing here. Definitely not crazy. Growth is not, it's not revenue growth over the last three, five years, around three to four percent per year. So not crazy growth but maybe worth looking at especially if there's a pullback again avon dug into the company all that well but it would be a way to play AI as well decent amount of earnings growth yeah
Starting point is 00:40:12 yeah i mean i i don't know this space all that well i know a lot of a lot of people on stock trades have talked about what is that crack in robotics that would be like uh it's it trades on the venture and i do like they do yeah and it's yeah i mean you'll look at the stock chart it's It's done quite well over the last while. But they do integrate a lot of AI. I can't even remember what it was. This probably would have been a year ago. But they won like a contract to like kind of take,
Starting point is 00:40:43 I believe it's like robots to go down and like analyze like buried pipelines under the ocean. So I mean, just like stuff that is dangerous or probably not feasible from a human perspective. If they can, you know, get AI to do this. And a lot of this industrial automation, I mean, to improve. efficiency. As you had mentioned, it will probably in the end cost a lot of human jobs. But in the end, I mean, there's also a lot of human error involved with human jobs as well, whereas if you can integrate this AI to make it a bit more seamless, obviously it helps these companies. So they're going to do it. I mean, we're seeing this all over at the expense
Starting point is 00:41:21 of human jobs. I think that's just kind of a reality we're going to have to face over the next five or 10 years here. But yeah, this is a space that I don't really know. all that well outside of something like Cracken. And that's just from kind of word to mouth. Yeah, but something else of our people to look into. But we've probably missed some subsectors, to be honest. Like, it's really hard to find a sector that will not be impacted one way or another by AI. We tried to give a mix of some of the obvious ones, obviously giving some stock ideas. Again, they're all ideas. Make sure you do your own research for all of them. even with the automation. It's not a space that neither of us really know all that well. But
Starting point is 00:42:06 we tried to give a wide array, wide array of ideas and subsectors to play it. Some that are more hyped right now, for a lack of better words, and some that are a bit more low-key that people may not think about investing, that will be more like indirect beneficiaries from AI. So there's a whole lot of different ideas. Hopefully, this episode really helped you. get some more ideas if you were interested in getting some AI exposure, maybe some of the names that are not really talked about all that much in financial media. So hopefully that help. Aside from that, just some housekeeping. If you haven't done so, make sure you give us a five-star review on the platform you listen at. That's always appreciated. We have Join TCI if you're
Starting point is 00:42:51 looking to get some extra and exclusive content for us. By all means, go there, joinTCI.com. Aside from that, Dan has a great investing platform if you're looking for stock recommendations at Stocktrades.cate. Anything else, Dan, before we let everyone know? No, that's it. It was a fun couple episodes. Thanks for listening, everybody. Yeah, thanks a lot. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a finance.
Starting point is 00:43:29 professional before making any financial or investment decisions.

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