Srikanth Iyer, lead portfolio manager of the i3 Investments team at Guardian Capital LP. Illustration by Joel KimmelThe Globe and Mail
Money manager Srikanth Iyer says concerns about an artificial intelligence (AI) bubble bursting may be justified, given lofty valuations across much of the sector.
Still, the lead portfolio manager of the i3 Investments team at Guardian Capital LP doesn’t think investors should jump ship or avoid AI stocks, believing in the long-term prospects for the sector’s best companies.
“If you have the right fundamentals, analysis and probabilities, the opportunity set of the AI economy is still strong and will continue to move up,” says Mr. Iyer, who oversees more than $6-billion in assets.
Mr. Iyer and his team are also using AI across their funds to predict earnings and dividend growth for companies in various sectors, as well as to support their long-short hedging strategies.
His Guardian i3 US Quality Growth Unhedged ETF GIQU-B-T has returned 18.2 per cent so far this year. Its one-year return is 19.7 per cent. Its three- and five-year annualized returns are 27.7 per cent and 14.9 per cent, respectively. The performance is based on total returns, net of fees, as of Dec. 5, according to Morningstar Canada data.
The Globe spoke with Mr. Iyer recently about three AI stocks he’s been buying and one stock he recently sold:
Name three stocks you own today and why.
Vertiv Holdings Co. VRT-N, the data centre and digital infrastructure company, is a stock we bought in January of this year at US$109 a share. As a leader in the industry, Vertiv has a strong advantage given the massive infrastructure demand ahead.
Vertiv has demonstrated tremendous earnings growth. Its projected earnings per share are set to rise by more than 44 per cent in fiscal 2025, far outpacing the industrial sector average, which typically hovers below 10 per cent. It also had standout cash flow growth of more than 40 per cent year over year in the third quarter, significantly higher than its peers and industry norms. Strong cash generation enables Vertiv to reinvest in new projects without relying on costly external financing, which supports sustainable expansion.
Vertiv also benefits from upward trends in analyst earnings estimates. A risk to the stock is the rising valuation, but any correction is a good time to buy, in our view.
Palantir Technologies Inc. PLTR-Q, which makes software platforms for the intelligence community, is a stock we bought in February this year at US$88 a share. Its AI platform powers advanced data analytics and decision-making, and is viewed as mission-critical across core sectors such as defence, health care, energy and finance.
Its third-quarter revenue was up 63 per cent year over year. U.S. commercial revenue grew 121 per cent year over year for the quarter ended Sept. 30, and the company raised its full-year 2025 guidance. It also posted solid operating and free cash flow generation, and has a strong liquidity position. It has the same valuation risk today as many other AI stocks, but we believe a correction would be a good time to buy.
Palo Alto Networks Inc. PANW-Q, a leader in network security, is a stock we bought in July this year at US$189 a share. Palo Alto has transitioned from selling individual products to offering integrated security platforms that help its customers consolidate vendors and increase contract size and customer retention. The shift has led to a record number of deals for the company and greater revenue retention, reinforcing its status as a preferred strategic security partner.
Palo Alto has consistently posted double-digit revenue growth, recently reporting 16 per cent year-over-year revenue growth for its first quarter ended Oct. 31. It’s also forecasting fiscal 2026 revenue to grow 14 per cent year over year. The company has maintained high gross margins and growing operating margins, signalling strong profitability and financial discipline.
With Palo Alto, I’d say it’s still a good time to buy the stock, while Vertiv and Palantir have much higher valuations.
Name a stock you’ve sold recently.
Accenture PLC ACN-N, the management consulting company, is a stock we bought in August, 2022, for US$303 a share and sold in July of this year for US$281. When we bought the company, capital spending on digital infrastructure was strong. But today, AI is beginning to alter the economy, including the consulting industry.
We decided to exit the stock at a loss because of increased caution about Accenture’s growth prospects, as slower corporate IT spending and prolonged client cycles are contributing to tepid bookings and more conservative forecasts for the next several quarters. We decided to look for better opportunities elsewhere.
This interview has been edited and condensed.