The Motley Fool spotlights three AI stocks ready for ‘bull run’
The explosive growth of the AI market has taken many tech stocks to record highs, but the Motley Fool argues that there are still hidden gems out there, highlighting three companies in particular: processor manufacturer AMD, cybersecurity company SentinelOne, and IT service provider Innodata. Each of them, though differing in size, has plenty of room to grow as the AI market expands, the Motley Fool contends.
AMD
With a market capitalization of $210.8 billion, AMD does not get as much attention as Nvidia. However, it has ramped up its production of graphics processors for data centers in recent years, notes the Motley Fool. Its latest chip, the MI300 Instinct, matches Nvidia’s H100 in performance while boasting a lower price tag, which makes it, in the Motley Fool’s words, a “compelling alternative.”
The Motley Fool adds that Wall Street expects AMD’s revenue to grow at a compound annual growth rate (CAGR) of 20% and its earnings per share to double from 2023 to 2026. This suggests that the company’s stock could surge as its data center business expands.
SentinelOne
SentinelOne, with a market capitalization of $6.48 billion, operates in the cybersecurity industry and aims to replace human analysts with AI-powered algorithms on its Singularity extended detection and response (XDR) platform.
In the 2024 fiscal year (ended January 31), the company’s revenue grew 47% to $621.2 million, whereas it had doubled in each of the previous two years. This slowdown drove away the bulls, writes the Motley Fool. However, analysts expect the company’s financial performance to improve.
One factor in its favor is the maelstrom around CrowdStrike, a competitor of SentinelOne in the XDR market, after the global IT outage caused by a flawed software update in July. The Motley Fool speculates that this blunder could push CrowdStrike clients to switch to SentinelOne and other cybersecurity platforms.
Innodata
Innodata, an IT services and enterprise software provider with a market capitalization of $514.6 million, had been considered a slow-growth company for some time. However, from 2019 to 2023, its revenue rose at a CAGR of 12%, notes the Motley Fool, while Innodata guides for “at least” 40% organic revenue growth this year. Its clients include five of the Magnificent Seven companies as of the start of 2024.
This year, Innodata secured an expansion of one of its large language models for an existing Magnificent Seven client, the company stated in its fiscal-2024 first-quarter financials. It expects this expansion to add approximately $23.5 million in annual revenue, while another contract, signed in April, is expected to bring in an additional $20.0 million.
Innodata stock has skyrocketed 1,231% over the past five years, yet the Motley Fool does not deem it too expensive.
