Investors should pay attention to the securities of mid-cap company Innodata, which helps big tech players train their AI models, says The Motley Fool. Thanks to increased demand for these services, Innodata's stock has jumped nearly 83% since the beginning of the year and that's just the beginning, the article says.
Details
The Motley Fool author John Ballard advised investors to take a closer look at Innodata, which is capitalized at $2.3 billion on Nasdaq. Since the beginning of the year, its stock price has risen 83%, but Ballard is confident that this is just the beginning.
Innodata is developing large language models for third-party artificial intelligence training. It is now working with several tech giants, including Google and Microsoft, notes the Motley Fool. Innodata expects to generate $10 million from one of its clients alone in the second half of 2025. By comparison, the same client spent only $200,000 in the last year, Ballard writes. The growth in spending reflects the dynamics in general: big tech companies are investing more and more in AI infrastructure, and Innodata is at the center of this boom, the article says.
Ballard notes that the stock looks expensive, trading at a Price-to-Earnings (P/E) multiple of 83. This number shows the ratio of a company's market capitalization to its net income for the year; a high one could indicate that the stock is overvalued. However, the consensus forecast is for this ratio to fall to 62 in 2026, notes the Motley Fool. Innodata could thus be a sleeper stock (i.e., not yet generating profits for shareholders) that would benefit from long-term investment by big tech players, Ballard suggests.
What others think
In early September, Barron's highlighted the same growth drivers for Innodata. "For investors convinced that we are still in the early stages of the AI revolution, Innodata is a quality small-cap asset. Its stock is worth buying and holding for the long term," the publication wrote, citing the company's position that the secret to recent AI breakthroughs lies not in the chips or algorithms that power the models, but in the quality of the raw data used to train them.
This, according to Barron's, is supported by its financial performance. In the second quarter, Innodata's revenue rose 79% year-over-year to $58.4 million, while gross margin added 10 percentage points to 39%. The company plans to release third-quarter results after the market closes on Nov. 6.
All five analysts covering Innodata stock advise buying it (Buy and Overweight ratings), MarketWatch shows. The average target price of $83.75 implies a potential upside of 15.6% from the last close.
This article was AI-translated and verified by a human editor
