It's been a magnificent year for Shopify (TSX:SHOP) stock, now up well over 63% year to date, beating the TSX Index by a wide margin. Despite the latest run-up, shares may still prove cheap relative to its long-term growth trajectory. Undoubtedly, the company stands out as a significant beneficiary as valuable new generative artificial intelligence (gen AI) technologies and tools work their way into the ecosystem.

Indeed, Shopify stands out as a firm that can augment customers in a way that allows them to drive revenues and margins simultaneously. Indeed, large language models (LLMs) can do many impressive things, including writing poems or even helping with homework. That said, the real test, I believe, is how LLMs can help firms improve their business fundamentals via automation and optimization.

Indeed, if the AI revolution carries over the next couple of years, the applications had better start generating enormous profits for more firms than just the AI accelerator makers themselves. In other words, there had better be some massive winners from this AI gold rush other than the so-called "pick-and-shovel" plays.

Indeed, much of the cash during the actual gold rush was made via the firms that sold the equipment to gold prospectors. For the AI scene, the big question is how far and wide the benefits will run. There's ample opportunity for e-commerce firms like Shopify to benefit significantly from what some may call the "next phase" of the AI boom.

A massive upgrade from Loop Capital

Recently, shares of Shopify received a pretty big upgrade from an analyst named Anthony Chukumba over at Loop Capital.

Mr. Chukumba hiked his price target on SHOP stock by a whopping US$30 to US$140 per share (that works out to just shy of CA$200 per share) while upgrading the rating to buy from hold (the equivalent of overweight from equal-weight). What's the reason behind the significant upgrade?

He's a big fan of Shopify's ability to use AI to improve the lives of its merchants. Notably, he sees personalized response recommendations as having the potential to jolt growth.

He's right on the money. The AI personalization factor will eventually benefit a broader range of businesses. Shopify seems like one of the ships poised to rise sooner than most others in the sea. In numerous prior pieces, I urged investors not to discount the company's footing in the AI race. Mr. Chukumba's latest upgrade reinforces my already bullish stance on Shopify stock as it looks to enter a big year for AI.

Shopify stock is pricey, but the AI catalysts are real

Now, it's hard to tell just how much AI hype has worked its way into the valuation after the latest upside surge. The stock isn't cheap at more than 105 times trailing price to earnings (P/E). Things aren't much better on a forward-looking basis, with SHOP stock going for 80 times forward P/E.

Undoubtedly, there's a much higher bar set for Shopify in the new year. But if Shopify can get the personalized AI opportunity right, perhaps shares could continue rolling towards that $200 mark and, just maybe, new all-time highs of around $215 per share.

As AI personalization catalysts propel Shopify and its peers in the new year, while holiday sales numbers eventually flow in, I think it's tough to overlook Shopify stock any longer. Arguably, it's one of Canada's most magnificent stocks.