The so-called artificial intelligence (AI) revolution is continuing, even as Trump tariff threats begin to hog the headlines. Undoubtedly, the technology isn’t going to slow down for anyone, especially following China’s impressive AI surprise in DeepSeek, which appears to rival some of the best-in-breed AI models in America. Indeed, the AI race is going to be a closer one. And with so much to gain, you can bet that firms involved will continue to be on their toes. But just because AI has so much promise does not mean AI stocks will continue to gain. Remember, a good company could have a bad stock if the price of admission is above and beyond its intrinsic value. If expectations are too high, a correction could be in order.
And for investors, that means insisting on cheap (or cheap-looking) companies that may not have all too much AI hype baked in. At the end of the day, investors should bet on secular trends and pick up shares of a firm only if there’s a margin of safety to be had. Additionally, paying up for the biggest winners may not be a winning strategy moving forward, especially if there are more unheard-of firms out there with the next big innovation.
Whether it be the next DeepSeek or something else entirely, it’s worth noting that the premium-priced winners of yesteryear will face increased competition. And with that, here are two cheap-looking stocks that don’t have as much AI priced in at current levels.
Thomson Reuters
Thomson Reuters (TSX:TRI) is far more tech-savvy than you think, with plenty of skin in the AI game as well as some pretty intriguing tech acquisitions made of late. Just last month, the media juggernaut bought an AI-driven accounting firm named SafeSend in an all-cash deal worth US$600 million. Undoubtedly, the product seems to fit well within Thomson Reuters’s portfolio as it leverages the power of AI to expand into the business of accounting.
Indeed, accounting is very much ripe for AI disruption. And as Thomson Reuters leverages its expertise and data edge, I’d be inclined to view the firm as more of an AI-first firm than anything else. After the SafeSend deal, I view TRI as one of the best-hidden gems to pick up if you’re looking for value in the AI scene.
Even after gaining 22% in the past two years, shares look quite cheap at 34.6 times trailing price to earnings (P/E). As an AI early adopter, I’d look for the profitability gains to really trickle in over the coming years and decades. Arguably, the impact of AI has already given a jolt to earnings. The big question remains: just how much more can AI power earnings growth? I still think the impact is being discounted by the market.
TD Bank
TD Bank (TSX:TD) is a banking gem that’s been in the rough in 2024. As the company looks to turn a corner in the new year, I believe that tech and AI remain key areas that could help the bank get back on the earnings growth track. With a new chief executive officer and other new managers giving the bank a fresh slate, I expect more in the way of positive surprises in the latter half of the decade.
With ample cash to spend on tech-driven efforts, perhaps a case could be made for TD being the tech-savviest bank in Canada. Around seven years ago, TD bought up AI firm Layer 6 in what was an under-the-radar deal. This goes to show how early to the AI race TD was.
With a 5.12% dividend yield, perhaps TD is one of the most bountiful names to bet on the AI revolution when it comes to the financial sector.