The rapid growth of the artificial intelligence (AI) market has pushed many stocks to record levels over the past few years. That’s why shares of Nvidia, the leading chip maker in that booming market, have risen 2,760% over the past five years.
Some investors may be hesitant to chase those massive gains, but many overlooked AI stocks may continue to 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. Primary data
Innodata was previously considered a slow-growing IT services and enterprise software company. However, its stock has risen from about $1 at the end of 2019 to about $32 today. This massive rise was a result of the AI-led acceleration in its top line.
Revenue rose 10% in 2023. But in the first nine months of 2024, sales rose 83% year over year to $111 million as its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 266% to $20 million. It has also become profitable on a generally accepted accounting principles (GAAP) basis. This explosive growth stems from the rollout of generative AI tools by five of the “Greater 7” companies.
For the full year, Innodata expects its revenue to rise in the range of 88% to 92% as more companies adopt generative AI services. From 2024 to 2026, analysts expect its sales to achieve a compound annual growth rate (CAGR) of 25% with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) seeing a CAGR of 29%.
These are excellent growth rates for a stock that trades at four times next year’s sales and 37 times adjusted EBITDA. Innodata has already made impressive progress over the past five years, but it may be trending even higher as it acquires more big tech companies with its data processing and AI capabilities.
2. The precise strategy
Once dismissed as a slow-growing enterprise software company, MicroStrategy began hoarding Bitcoin in 2020. At the end of last quarter, it owned 252,220 of the digital tokens with a current market value of $19.26 billion. That’s roughly a third of MicroStrategy’s enterprise value of $59.1 billion.
Bulls believe MicroStrategy’s hoarding strategy will pay off if prices of top cryptocurrencies rise over the next few years. In theory, the rising value of its bitcoin holdings could offset the slow growth of its enterprise software business.
However, MicroStrategy is also a productive AI company. Last October, it launched MicroStrategy AI, a platform that enables companies to integrate generative AI features into their existing data applications. It expects these new features, coupled with the conversion of its on-premises applications to cloud-based services, to stabilize the growth of its core software business as more cryptocurrencies accumulate.
Analysts only expect MicroStrategy’s revenue to have a CAGR of 1% from 2023 to 2026, as it remains unprofitable on a GAAP basis. But the value of its bitcoin holdings could continue to grow — and its generative AI business could see a sudden growth spurt like Innodata if it succeeds in attracting more customers.
3. Cavitation
Lumen, the telecommunications company formerly known as CenturyLink, has suffered five straight years of declining revenue. It has also not been profitable over the past two years and has suspended its dividend in 2022. That’s why its stock price fell to less than $1 in June of this year.
Unlike many of its telecom peers, Lumen has not expanded into the wireless market to reduce its reliance on wired communications. Instead, it doubled down on the slow-growing wireline market and bundled more cloud, security and collaboration services with its commercial wireline plans.
It has also expanded into the high-growth fiber market. Lumen originally expected slow but stable growth as economies of scale kick in, but its declining commercial wireline revenues are offset by its consistently higher fiber revenues. As a result, its rising costs outweighed its declining revenues and its losses widened.
But over the past few months, Lumen has closed a series of AI connectivity deals worth $5 billion — including one to upgrade data center infrastructure for Microsoft’s Azure cloud platform to handle more productive AI applications.
These new deals set Lumen shares on fire and brought them back to around $9. But even after that rise, its enterprise value of $25.5 billion is less than two times higher than its projected 2024 sales. Analysts expect its revenue to decline again in 2024 and 2025, but its new AI contracts could help it exceed those lower expectations. If that happens, Lumen stock could become parabolic as it attracts more value-seeking investors.
Should you invest $1,000 in Innodata now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls 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.
