Portfolio diversification and proper risk management are really important aspects of long-term investing. However, allocating a portion of your portfolio to growth sectors could increase your chances of generating solid returns in the long run. That's why the importance of high-growth stocks can't be ignored completely.

One such emerging opportunity lies in the AI (artificial intelligence) sector today, where companies are striving to shape the future of industries with innovative technological solutions. In this article, I'll highlight one of the top Canadian AI stocks from my portfolio that I believe has the potential to deliver extraordinary returns in the next five years.

A top Canadian AI stock with massive upside potential

While many Canadian tech companies have increased their focus on AI technology of late, BlackBerry (TSX:BB) seems well-positioned to benefit from its strategic shift towards AI-driven solutions and cybersecurity and the Internet of Things (IoT).

After rallying by more than 30% over the last four months, BB stock currently trades at $3.97 per share with a market cap of $2.3 billion. However, the stock has still underperformed the broader market by a wide margin so far in 2024. While the TSX Composite has inched up by 22% year to date, BlackBerry has seen 15% value erosion, making it look undervalued based on its long-term growth outlook.

Now, let me explain how BlackBerry is utilizing AI and machine learning to drive growth across its key business segments.

BlackBerry's AI-powered cybersecurity solutions

In the cybersecurity segment, BlackBerry's Cylance division offers advanced AI-powered security solutions that can proactively identify and prevent security threats. While traditional cybersecurity measures mainly react to attacks after they've already happened, the company's Cylance machine learning algorithms can predict and neutralize potential threats before they could even cause any major harm.

Earlier this year, BlackBerry introduced an innovative, generative AI-powered cybersecurity advisor called Cylance Assistant. This AI assistant takes the already impressive capabilities of BlackBerry's Cylance AI platform to the next level by offering real-time, context-aware guidance to businesses, which could play an important role in strengthening their cybersecurity defence and streamlining their operations.

The growing use of AI and machine learning in IoT segment

Besides cybersecurity, BlackBerry is also leveraging artificial intelligence and machine learning to drive innovation in its advanced IoT solutions. Whether it's about helping automakers develop safer and smarter vehicles or allowing real-time data analysis for industrial applications, BlackBerry's IoT segment is likely to play a key role in its AI-driven growth strategy.

BlackBerry's intelligent vehicle data platform, IVY, could be a good example of how the company is combining its expertise in IoT, AI, and cloud to create innovative solutions for the automotive industry. The IVY platform, which is developed in collaboration with Amazon Web Services (AWS), allows automakers to receive real-time data from vehicle sensors and process it to provide a better user experience and safety features.

Foolish bottom line

While BlackBerry stock has rallied in the last few months, its efforts to integrate AI and machine learning technologies in its solutions have largely been overlooked by the market so far. As the demand for such advanced solutions surges in the coming years, this AI-focused Canadian stock could skyrocket and yield some eye-popping returns.