Why Innodata Stock Is Skyrocketing This Week

Key Points

• Innodata blends the worlds of data and artificial intelligence (AI).

• It serves both AI builders and AI adopters.

• Despite its share price rising more than fivefold over the last year, Innodata looks like a potential buyout candidate to Wedbush.

• 10 stocks we like better than Innodata ›

Shares of up-and-coming global data engineering firm Innodata (NASDAQ: INOD) soared 23% higher this week as of 11 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.

Whether helping artificial intelligence (AI) builders (such as those making large language models) or AI adopters (most enterprises these days), Innodata's capabilities help companies prepare for today's biggest megatrend.

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And these abilities have caught the eye of the market, which has sent Innodata's stock up over 450% in just the last year.

This week, Innodata's stock received another 23% boost after Wedbush Securities named it a "top takeout target" in an AI industry scrambling for resources and talent.

Curating, transforming, annotating, and governing data

Already counting five of the "Magnificent Seven" as customers, Innodata's sales exploded this year, rising 79% in the second quarter alone.

While this growth will undoubtedly slow over the short term as the company laps comparable growth of over 130% in last year's third quarter, Innodata's long-term prospects look promising.

Image source: Getty Images.

Though it would take a data scientist or AI expert to fully explain Innodata's operations, some of its case studies are:

• Safeguarding LLMs by "breaking" them before release to discover and fix vulnerabilities
• Enhancing the data used by a wide array of AI chatbots, improving their outcomes
• Turning medical data from patient records into clean, actionable insights
• Providing content moderation so that advertisers can find suitable placements for their ads

In layman's terms, if a company deals with data and generative AI, Innodata can probably help in some way.

Following its incredible run -- and recent buyout chatter -- Innodata now trades at a lofty 84 times free cash flow. Interested investors may want to consider buying over time, rather than all at once today.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.