If You're Building Generational Wealth in 2026, This AI Stock Deserves a Spot in Your Portfolio
Key Points
Innodata stock is soaring on insatiable demand for its AI data engineering and safety services.
A new partnership with a leading hyperscaler could potentially generate $3 billion in annual revenue.
There are risks, but the company's services are becoming more valuable as AI advances.
- 10 stocks we like better than Innodata ›
Most of the attention in artificial intelligence (AI) is on the companies supplying the chips, memory, networking, and cooling that power data centers -- the essential infrastructure. But there's one smaller AI stock posting strong growth by helping clean up data so the biggest AI companies can train their models.
Shares of Innodata (NASDAQ: INOD) have climbed 128% over the past year, with nearly all of those gains coming after the company's latest earnings report. You read that right: The stock more than doubled over the past month -- and I'd still consider buying it. Here's why.
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Innodata is moving up the AI value chain
The most powerful AI models don't know anything until they're trained. They only gain knowledge from data fed into the model -- and that's where Innodata comes in.
Big tech companies have the infrastructure to run AI, but they still need clean, accurate data to train their models. Innodata specializes in preparing and cleaning data for training, while also testing models for safety and compliance.
The latest results show Innodata moving up the AI value chain toward bigger deals and more sophisticated work. Revenue jumped 54% year over year to $90 million in the first quarter.
That strong quarter was driven by demand for Innodata's data engineering, evaluation, and other safety services for autonomous agents. As AI advances and agents become more widely used, Innodata's role in the market isn't shrinking -- it's becoming more valuable to the largest AI players.
The real reason the stock is soaring
One new partnership disclosed in the Q1 report helps explain the stock's post-earnings surge. A large hyperscaler (which management didn't name) selected Innodata as its global partner to evaluate models for safety, reliability, and real-world readiness before official release. Management says this has the potential to generate $3 billion in annualized revenue, with room to grow -- a big number against its trailing revenue of $283 million.
Innodata does face customer concentration risk. One large customer in its digital data solutions business accounted for 58% of total revenue last year. But the company is diversifying. Excluding its largest customer, revenue from other clients grew 453% year over year in the first quarter.
Another concern is valuation. After the post-earnings jump, the stock isn't cheap, trading at a forward earnings multiple of 68. On the other hand, that premium looks fairly reasonable given the company's momentum.
Alongside strong revenue growth, earnings per share rose 91% year over year. That level of earnings growth relative to revenue signals meaningful operating leverage, as the company meets rising demand without needing to hire more employees.
While many investors chase chip stocks, Innodata could be a sleeper pick-and-shovel play on AI growth worth considering right now.
Should you buy stock in Innodata right now?
Before you buy stock in Innodata, consider this:
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John Ballard 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.
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