Market Outlook: Canadian stocks offer exposure to AI buildout

Summary

• CoreWeave's strong Q3 results & increased annual guidance to $13 billion in revenue have stabilized investor sentiment regarding the AI cloud sector.
• CoreWeave now expects to raise only $5 billion by 2027 for buildout capacity, allowing financing at 7–8% bond rates & reducing near-term pressure.
• Financing risks, timely data centre construction, & public policy remain key challenges despite strong demand for AI cloud growth.
• Software valuations present opportunities where AI disruption fears have exceeded actual business deterioration evidence.
• Constellation Software is highlighted as a Canadian growth story with 15% annualized revenue growth & resilience in serving small & medium businesses.
• Open Text offers value through share buybacks, asset sales, & reinvestment after switching CEOs & trading at six times earnings.
• Adobe is considered undervalued at 10 times free cash flow despite AI fears, with consistent double-digit revenue & earnings growth.
• Alphabet faces near-term free cash flow constraints from high AI capex but holds a $500 billion backlog & trades at 15 times earnings.
• Canadian equipment suppliers Finning & Toromont are positioned to benefit from major infrastructure & data centre projects as top Caterpillar dealers.
• WSP Global is targeted for engineering demand driven by critical minerals, transportation, & data centre projects, with double-digit growth potential.
• Canadian data centre approvals from companies like Meta suggest potential growth if U.S. community pushback increases.