3 Artificial Intelligence (AI) Stocks That Could Go Parabolic

The rapid growth of the artificial intelligence (AI) market has driven many stocks to record highs in recent years. Therefore shares of Nvidiathe leading chipmaker in this booming market, is up 2,760% over the past five years.

Some investors may be hesitant to chase these breakneck gains, but many overlooked AI stocks could still go parabolic in the future. Let’s take a look at three stocks that fit this description: Innodata (NASDAQ:INOD), Microstrategy (NASDAQ:MSTR)And Lumen Technologies (NYSE:LUMN).

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1. Innodata

Innodata was once considered a slow-growing IT services and business software company. However, the share price rose from about $1 at the end of 2019 to about $32 today. This massive rally was the result of an AI-driven acceleration in top-line returns.

Sales increased by 10% in 2023. But in the first nine months of 2024, revenue rose 83% year-over-year to $111 million, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 266% to $20 million. The company was also profitable based on generally accepted accounting principles (GAAP). This explosive growth resulted from the adoption of generative AI tools for five of the “Magnificent Seven” companies.

For the full year, Innodata expects revenue to increase in the range of 88% to 92% as more companies use its generative AI services. From 2024 to 2026, analysts expect a compound annual growth rate (CAGR) of 25% for revenue, while adjusted EBITDA has a CAGR of 29%.

Those are excellent growth rates for a stock that trades at four times next year’s sales and 37 times its adjusted EBITDA. Innodata has already enjoyed great success over the past five years, but it could rise even further as it attracts more big tech companies with its data processing and AI capabilities.

2. Microstrategy

MicroStrategy was once dismissed as a slow-growing enterprise software company, then it started hoarding Bitcoin in 2020. At the end of the last quarter, the company had 252,220 digital tokens with a current market value of $19.26 billion. That’s almost a third of MicroStrategy’s enterprise value of $59.1 billion.

Bulls believe MicroStrategy’s hoarding strategy will pay off as the price of the top cryptocurrency skyrockets over the next few years. In theory, the rising value of its Bitcoin holdings could offset slower growth in its enterprise software business.

However, MicroStrategy is also a generative AI company. Last October, the company launched MicroStrategy AI, a platform that enables companies to integrate generative AI capabilities into their existing data applications. The company expects that these new features, along with the conversion of its on-site applications into cloud-based services, will stabilize the growth of its core software business as it accumulates more cryptocurrencies.

Analysts expect MicroStrategy’s revenue to grow at just a 1% annual growth rate from 2023 to 2026 as the company remains unprofitable on a GAAP basis. But the value of its Bitcoin holdings could continue to rise – and its generative AI business, like Innodata, could see a sudden growth spurt as it gains more customers.

3. Lumens

Lumen, the telecommunications company formerly known as CenturyLink, has suffered five straight years of declining revenue. Additionally, the company has been unprofitable for the past two years and suspended its dividend in 2022. Because of this, the share price fell below $1 in June this year.

Unlike many of its telecom competitors, Lumen has not expanded into the wireless market to reduce its reliance on landline connections. Instead, it increased its focus on the slow-growing fixed-line market and bundled more cloud, security and collaboration services into its fixed-line business plans.

The company also expanded into the higher-growth fiber market. Lumen originally expected slow but steady growth as economies of scale took effect, but declining fixed-line revenues consistently offset rising fiber revenues. As a result, rising costs outpaced falling revenues and losses widened.

But in recent months, Lumen has secured a series of AI connectivity deals worth $5 billion – including one to modernize its data center infrastructure Microsoftis Microsoft’s Azure cloud platform for processing more generative AI applications.

These new deals lit a fire under Lumen stock, sending it back to around $9. But even after this recovery, the company’s $25.5 billion value is less than double its forecast revenue for 2024. Analysts expect revenue to fall again in 2024 and 2025, but the new AI Contracts could help meet these low expectations. If that happens, Lumen’s stock could go parabolic as it attracts more value-oriented investors.

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