The rapid growth of the artificial intelligence (AI) market has driven many stocks to record highs over the past few years. That’s why shares of Nvidia, the leader in chip manufacturing in that fast-growing market, have soared 2,760% over the past five years.
While some investors may be reluctant to chase these impressive gains, many overlooked AI stocks still have the potential for a parabolic future. Let’s take a look at three stocks that fit this description: Innodata (NASDAQ: INOD)microstrategy (NASDAQ:MSTR)and Lumen Technologies (New York Stock Exchange: Lumun).
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1. Innodata
Innodata was once considered a slow-growth IT services and enterprise software company. However, the company’s stock price has soared from about $1 at the end of 2019 to about $32 today. This massive rise was the result of AI-driven sales acceleration.
Sales in 2023 increased by 10%. However, in the first nine months of 2024, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 266% to $20 million, and revenue rose 83% year over year to $111 million. It became. The company also became profitable under generally accepted accounting principles (GAAP). This explosive growth is due to the deployment of generative AI tools to five of the “Magnificent Seven” companies.
Innodata expects its revenue to jump between 88% and 92% for the full year as more companies adopt its generative AI services. Analysts expect adjusted EBITDA to experience a CAGR of 29% and revenue to experience a compound annual growth rate (CAGR) of 25% from 2024 to 2026.
This is an impressive growth rate for a stock trading at 4x next year’s sales and 37x adjusted EBITDA. Innodata has already achieved impressive results over the past five years, but it could take another leap forward by corralling more big tech companies with its data processing and AI capabilities.
2. Microstrategy
MicroStrategy, once looked down upon as a slow-growing enterprise software company, began buying up Bitcoin in 2020. At the end of the latest quarter, the company held 252,220 digital tokens, with a current market value of $19.26 billion. That’s nearly one-third of MicroStrategy’s $59.1 billion enterprise value.
Bulls believe that MicroStrategy’s buyout strategy will pay off if the prices of top cryptocurrencies soar over the next few years. In theory, the rise in the value of Bitcoin holdings could offset slower growth in the enterprise software business.
However, MicroStrategy is also a generative AI company. Last October, the company unveiled MicroStrategy AI, a platform that allows companies to integrate generative AI capabilities into existing data applications. The company expects these new features and the conversion of on-site applications to cloud-based services to stabilize the growth of its core software business as it accumulates more cryptocurrencies.
Analysts only expect MicroStrategy to have a CAGR of 1% from 2023 to 2026, as its revenue remains unprofitable on a GAAP basis. However, the value of the company’s Bitcoin holdings may continue to increase, and if it attracts more customers, its generative AI business could experience sudden growth similar to Innodata.
3. Lumen
Lumen, the telecommunications company formerly known as CenturyLink, suffered five consecutive years of declining revenue. Additionally, the company has not made a profit for the past two years and has stopped paying dividends in 2022. That’s why the company’s stock price fell below $1 in June of this year.
Unlike many of its peers, Lumen did not expand into the wireless market to reduce its reliance on wired connections. Instead, they focused on the slow-growing wired market and bundled more cloud, security, and collaboration services into their business wired plans.
We also expanded into the high-growth textile market. Lumen initially expected to generate slow but steady growth as economies of scale kick in, but lower business wireline revenue consistently offset higher fiber revenue. As a result, higher costs outweighed lower revenue, and losses widened.
But over the past few months, Lumen has signed a series of AI connectivity deals worth $5 billion. This includes upgrading data center infrastructure on Microsoft’s Azure cloud platform to handle more generative AI applications.
These new trades fueled Lumen’s stock price, pushing it back to around $9. But even after that increase, the company’s $25.5 billion enterprise value is still less than double its 2024 revenue projections. Analysts expect the company’s sales to decline again in 2024 and 2025, but the new AI contract could help erase those low expectations. If that happens, Lumen’s stock price could go parabolic as it attracts more value-seeking investors.
Should you invest $1,000 in Innodata right now?
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Leo Sun has no position in any stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and NVIDIA. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
