BigBear.ai (BBAI -6.92%) and Innodata (INOD -2.94%) characterize two alternative ways to spend money on the booming synthetic intelligence (AI) market. BigBear.ai develops AI modules for edge networks, whereas Innodata helps massive corporations put together their knowledge for AI functions.
Over the previous 12 months, BigBear.ai’s inventory surged greater than 390% because it impressed buyers with the stabilization of its enterprise and the rollout of its biometric safety companies. Innodata’s inventory rose about 140% because the market’s demand for its AI-oriented companies soared. Must you nonetheless purchase both of those high-flying AI shares as we speak?
Picture supply: Getty Pictures.
The variations between BigBear.ai and Innodata
BigBear.ai’s three important AI modules — Observe, Orient, and Dominate — ingest knowledge, determine traits, and predict future outcomes, respectively. It installs its modules on edge networks, which obtain and course of that knowledge earlier than it reaches its purchasers’ origin servers. It additionally shares that knowledge with greater AI-driven corporations, similar to Palantir.
Earlier than BigBear.ai went public by merging with a particular goal acquisition firm (SPAC) in late 2021, it claimed it may triple its annual income from $182 million in 2021 to $550 million in 2024. Nonetheless, its income grew from $146 million in 2021 to solely $158 million in 2024, because it grappled with powerful competitors, macro headwinds, and the chapter of its prime buyer, Virgin Orbit. To spice up its income and develop its ecosystem, it acquired the AI imaginative and prescient agency Pangiam final April.
Innodata went public again in 1993, but it surely did not entice a lot consideration as a result of it was a small analytics software program supplier that elevated its income at a compound annual development charge (CAGR) of 6% from 1994 to 2018. However in 2018, it launched a set of task-specific microservices that would effectively put together massive quantities of knowledge for AI functions.
5 of the “Magnificent Seven” corporations subsequently employed Innodata to organize their AI-oriented knowledge, and its annual income surged at a CAGR of 20% from 2018 to 2024. Its enterprise boomed as a result of these massive tech corporations usually spend 80% of their time getting ready the info for a brand new AI challenge and simply 20% of that point coaching the precise algorithm. To hurry up that inefficient course of, these tech giants outsourced the preparation of that knowledge to Innodata.
Which firm may develop sooner over the subsequent three years?
Over the subsequent three years, BigBear.ai’s development ought to be pushed by its swelling backlog of presidency contracts — which embrace new digital ID and biometrics companies for the Division of Homeland Safety (DHS) at airports and different ports of entry, a modernization challenge for the U.S. navy’s Orion Resolution Help Platform (DSP), and new provide chain initiatives. It may additionally entice extra industrial purchasers because the macro surroundings warms up once more.
Throughout the identical interval, Innodata’s development ought to be fueled by the fast enlargement of the generative AI market, which ought to drive its massive tech clients to ramp up their spending on its knowledge preparation companies. It’ll possible entice much more massive clients.
|
Projected Income Development |
2025 |
2026 |
2027 |
|---|---|---|---|
|
BigBear.ai |
6.1% |
12.1% |
No consensus but |
|
Innodata |
41.5% |
23.5% |
5.1% |
Knowledge supply: Marketscreener.
BigBear.ai’s income development is anticipated to speed up in 2025 and 2026, however analysts haven’t but set any agency forecasts for 2027. Innodata’s income development is anticipated to decelerate in 2026 and 2027 because it saturates its core buyer base of Magnificent Seven clients, and its potential enlargement into different markets hasn’t been factored into these estimates but.
BigBear.ai isn’t but worthwhile, however analysts anticipate it to slender its web losses by 2026. Innodata turned worthwhile in 2024, and analysts anticipate its web earnings to develop at a CAGR of 16% by 2027 as its pricing energy in its area of interest market improves and economies of scale kick in.
Which inventory is a greater worth proper now?
With a market cap of $2.1 billion, BigBear.ai trades at 12 occasions this 12 months’s gross sales. Innodata, which is valued at $1.6 billion, trades at lower than 7 occasions this 12 months’s gross sales.
BigBear.ai seems a bit expensive if its income development would not speed up in 2027 and past. Its development within the authorities sector is encouraging, however these contracts could be much less predictable than its industrial contracts. It is also nonetheless rising at a slower charge than higher-growth AI leaders similar to Palantir.
In the meantime, Innodata seems to be a greater worth as a result of analysts’ longer-term estimates for 2027 could also be too conservative. With all that money coming in from its Magnificent Seven clients, it may nonetheless have loads of methods to develop each organically and inorganically over the subsequent two years. So, whereas BigBear.ai and Innodata may each profit from the secular enlargement of the AI market, Innodata’s stronger development, increased income, and decrease valuation make it the higher purchase.
Leo Solar has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Palantir Applied sciences. The Motley Idiot has a disclosure coverage.
