Nvidia (NVDA 0.97%) has been one of the market's best-performing artificial intelligence (AI) stocks. The chipmaker's shares rallied roughly 1,240% over the past five years as its sales of data center GPUs, which are used to process complex AI tasks, skyrocketed.
As the top maker of picks and shovels for the AI gold rush, Nvidia still has a bright future. From fiscal 2025 (which ended this January) to fiscal 2028, analysts expect its revenue and earnings per share (EPS) to both grow at a CAGR of 41% as the AI boom continues. Those are stellar growth rates for a stock that trades at 28 times next year's earnings, and it could climb another 31% to hit Wall Street's average 12-month price target of $237.94 per share.
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Yet analysts expect another oft-overlooked AI stock to deliver even bigger gains than Nvidia. That company is Innodata (INOD 1.55%), a data analytics company that helps large tech companies prepare their data for AI projects. Over the next 12 months, analysts expect its price to soar roughly 68% to an average price target of $93.75.
We should take Wall Street's rosy estimates with a grain of salt, but Innodata has already outperformed Nvidia over the past five years with a gain of nearly 1,400%. Let's see why Innodata's stock soared -- and if it can actually outperform Nvidia next year.
NASDAQ: INOD
Key Data Points
What does Innodata do?
Innodata was founded in 1988, and it didn't attract much attention when it went public in 1993. At the time, it seemed like just another small, slow-growth data services provider. Its content digitization, digital publishing, and data enrichment services all served niche customers, were labor-intensive, and difficult to scale. From 1994 to 2019, its revenue only grew at a CAGR of 6%. At the end of 2019, it was trading at just $1.14 per share, which was 32% below its split-adjusted IPO price of $1.67.
But in 2018, Innodata launched a suite of task-specific microservices that efficiently annotated large amounts of high-quality data for AI applications. The market's demand for these services skyrocketed as the AI boom started, and at least five of the Magnificent Seven companies now use its services to clean up and prepare their AI-oriented data.
When large tech companies launch a new AI project on their own, they generally spend 80% of their time simply preparing that raw data and just 20% of the time training the actual algorithm. That's a painfully expensive and inefficient process, so it's a lot smarter to outsource all of that work to Innodata.
How fast is Innodata growing?
From 2019 to 2024, Innodata's revenue grew at a CAGR of 25% from $56 million to $171 million. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged from just $3 million in 2019 to $35 million in 2024.
That acceleration was driven by its R&D investments in its new Innodata Labs unit, which focuses on integrating its features into scalable AI data-preparation services. Its previous experience with filtering out large amounts of high-quality data supported that rapid transition.
Innodata expects its revenue to rise at least 45% in 2025 and to deliver "transformative growth" in 2026 as the generative AI market expands and it gains even more big tech customers. Analysts expect its revenue to grow 46% to $249 million in 2025 and 25% to $311 million in 2026.
As Innodata scales up its business, its operating costs should decline and its pricing power should improve. That's why its adjusted EBITDA is expected to rise 53% to $53 million in 2025, and increase 26% to $67 million in 2026.
Could Innodata outperform Nvidia by the end of 2026?
With an enterprise value of $1.8 billion, Innodata isn't a screaming bargain at 33 times this year's adjusted EBITDA -- but its robust growth rates could support that higher valuation. If it matches analysts' estimates and maintains the same EV/EBITDA ratio, its enterprise value could rise 22% to $2.2 billion over the next 12 months. If it trades at a more bullish 45 times its adjusted EBITDA, its enterprise value could grow 67% to $3 billion -- which could nearly match the average 12-month target for the stock.
Therefore, it wouldn't be surprising if Innodata outperforms Nvidia over the next 12 months. It's a smaller niche company, but it's growing like a weed. However, these two companies serve different areas of the booming AI market -- and it might be smart to simply own both of them instead of betting on one outperforming the other.
