Three potential AI company shares that might experience exponential growth.
The expansion of the artificial intelligence (AI) sector led numerous shares to hit record highs lately. Among these, Nvidia's share, acting as a benchmark for the explosive market, increased an astounding 2,760% in the last five years.
Some may hesitate to chase such rapid gains, but there's a chance that numerous untapped AI stocks could experience a similar exponential surge in the future. Let's examine three such stocks: Innodata (0.0288%), MicroStrategy (0.0286%), and Lumen Technologies (0.0055%).
1. Innodata
Initially perceived as a lethargic IT services and enterprise software company, Innodata's stock broke out from its $1 closing price at the end of 2019 to reach approximately $32 presently. This substantial growth could be attributed to AI-stimulated growth in its revenue.
The company's revenue increased by 10% in 2023, but during the first three quarters of 2024, sales surged 83% year-over-year to $111 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) skyrocketing by 266% to $20 million. It also transitioned to profitability based on generally accepted accounting principles (GAAP). This impressive growth stemmed from its implementation of generative AI tools for five prominent tech companies, known as the "Magnificent Seven."
For the year, Innodata anticipates its revenue to increase dramatically in a range of 88%-92% as more companies begin adopting its generative AI services. From 2024 to 2026, analysts project its sales to have a compound annual growth rate (CAGR) of 25% and its adjusted EBITDA to exhibit a CAGR of 29%.
Despite an already impressive five-year run, Innodata could continue its upward trajectory as it secures more top tech companies with its data processing and AI abilities.
2. MicroStrategy
Once regarded as a slowly evolving enterprise software company, MicroStrategy made headlines in 2020 by acquiring Bitcoin. At the end of its most recent quarter, it held 252,220 Bitcoin tokens with a market value of $19.26 billion – equating to nearly a third of MicroStrategy's enterprise value of $59.1 billion.
Bullish investors expect MicroStrategy's Bitcoin buying spree to prove advantageous if Bitcoin's price soars in the coming years. This potential increase in value could balance out any slower growth in its enterprise software business.
Beyond its Bitcoin acquisition, MicroStrategy has also entered the generative AI sector. In October 202X, it launched MicroStrategy AI, a platform allowing companies to integrate generative AI features into their existing data applications. Transforming its on-site applications into cloud-based services and integrating new AI features are expected to stabilize the growth of MicroStrategy's core software business and improve its Bitcoin holdings' value.
Analysts only predict MicroStrategy's revenue to have a 1% CAGR from 2023 to 2026, while it remains unprofitable according to GAAP. However, the value of its Bitcoin holdings could continue growing – and its generative AI business might experience sudden growth like Innodata if it successfully acquires more clients.
3. Lumen
Formerly known as CenturyLink, Lumen experienced five straight years of diminished revenue. In addition, it was unprofitable for the last two years and stopped paying dividends in 2022, causing its stock to drop below $1 in June 20XX.
In contrast to its peers, Lumen didn't expand into the wireless market to reduce its reliance on traditional wireline connections. Instead, it concentrated on the slow-growth wireline market and bundled additional cloud, security, and collaboration services with its business wireline plans.
Lumen also transitioned into the expanding fiber market. Initially anticipated to generate steady but modest growth, its continuous decline in business wireline revenue consistently countered its rising fiber revenue. Consequently, its rising expenses outweighed its decreasing revenue, enlarging its losses.
However, over the last few months, Lumen secured a series of AI connectivity deals valued at $5 billion – such as the upgrade of Microsoft's Azure cloud platform's data center infrastructure to optimize for more generative AI applications.
These new deals rekindled Lumen's stock and propelled it back to approximately $9. Nevertheless, its enterprise value of $25.5 billion is still less than double its projected 2024 sales. Analysts predict its revenue to slide again in 2024 and 2025, but its new AI contracts could enable it to surpass these modest expectations. If so, Lumen's stock might experience a parabolic surge as it captures the attention of value-seeking investors.
- For those interested in diversifying their investing portfolio, considering AI-focused companies like Innodata could be an attractive option. Given its impressive financial performance and potential growth in generative AI services, investing in Innodata could yield significant returns in the coming years, especially as more companies adopt its technologies.
- If you're looking to allocate some of your finance into the tech sector, MicroStrategy's intertwined interests in Bitcoin and AI could provide an intriguing opportunity. As Bullish investors speculate on Bitcoin's future value and MicroStrategy's AI business gains traction, investing in this company could yield potential profits, especially if Bitcoin's price rises and the AI business accelerates growth.
