Stocks to buy

3-2-1 Blastoff! 3 AI Stocks Ready to Take Off Soon.

The AI revolution is well underway, and the market has been generously rewarding the innovators an pioneers of this game-changing technological shift. However, many of these AI stocks are now trading at lofty valuations, leaving little room for further upside.

For those willing to dig a little deeper, there remain a handful of under-the-radar AI stocks that have yet to be fully discovered by the masses. And it’s these hidden gems that could very well unlock the most significant upside potential for your portfolio in the years ahead.

These lesser-known players are still in the early stages of their growth trajectories. And with the AI revolution still in its relative infancy, getting in early on these up-and-comers could pay off handsomely for those with a long enough time frame. Let’s take a look!

Data Storage Corp (DTST)

Source: carlos castilla/Shutterstock

Data Storage Corp (NASDAQ:DTST) is a stock that’s been on my radar for quite some time, and my conviction paid off handsomely! Even with shares trading at around $5 apiece, I firmly believe the party is just getting started for this under-the-radar gem.

Sure, traditional valuation metrics might make DTST stock seem a tad pricey at first glance. But when you zoom out and consider the company’s trajectory and future potential, that premium starts to look like a bargain. Data Storage Corp still trades at a significant discount compared to the big boys in the industry, leaving a much longer runway for growth in the coming months.

We’re already witnessing the early signs of a hypergrowth inflection point, with total revenue surging 36% year-over-year in Q3. That’s nearly 20% higher than Wall Street expected! The company’s CloudFirst business alone pulled in $3.7 million for the quarter, with net income coming in north of $800,000, and EBITDA surging past $1.1 million. Indeed, that’s not too shabby for a business that’s still flying under most investors’ radars.

With numbers like these, it’s only a matter of time before Wall Street and retail investors catch on and drive DTST to new highs.

Alibaba (BABA)

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When you think of AI innovation powerhouses, Alibaba (NYSE:BABA) might not be the first name that springs to mind. But ignore this Chinese tech titan at your own peril, because Alibaba is making serious waves in the AI arena.

Yes, I’ll concede that Alibaba’s roots are firmly planted in the e-commerce sphere. But to pigeonhole this company as just an “outdated online shopping website” would be a grave mistake. This business has expanded into virtually every realm of tech imaginable, with AI being one of management’s key current focus areas.

Now, BABA stock hasn’t performed the best (to put it nicely) in recent years. But that’s more a consequence of the broader Chinese market selloff than a reflection of the company’s prospects. With Beijing introducing a slew of stimulus measures to rekindle growth, I believe Chinese stocks like Alibaba are primed for a powerful U-turn.

Alibaba could easily deliver multi-bagger returns from current levels, as this company remains one of the most undervalued tech behemoths you can get your hands on. And in the AI sphere, their in-house models – while still lagging behind Western counterparts in some areas – have a massive captive market to tap into. Let’s not forget, Chinese companies will likely flock to local AI solutions over English-based models.

Moreover, Alibaba is taking aggressive steps to turbocharge its cloud business, a crucial component of its AI growth strategy. The company recently slashed some product costs by up to a staggering 55%, which should make their offerings far more attractive compared to entrenched cloud rivals like Tencent (OTCMKTS:TCEHY). Alibaba has all the ingredients to be an AI juggernaut in the making.

Innodata (INOD)

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If you’re looking for a pure play on the AI data annotation boom, then Innodata (NASDAQ:INOD) deserves a hard look. This global data engineering company specializes in providing the fuel that powers modern AI models: meticulously-labeled data. But after a short seller report was released last month, INOD stock has been thrown in the bargain bin, plunging 40% lower as of writing.

The crux of the bear case? Allegations that Innodata’s AI models and data annotation services aren’t nearly as robust as advertised. Well, that critique could arguably be leveled at every AI company under the sun right now. Remember, SMCI (NASDAQ:SMCI) faced similar short seller scrutiny back in January 2023 – yet the stock has skyrocketed nearly 1,000% since then, as I write this in March 2024.

I think the worries around Innodata are profoundly overblown. This is a company that has signed lucrative deals with four of the five largest tech titans on the planet. Plus, institutional investors have sizeable stakes. I think they’ve done their own research. And with so much smart money continuing aboard this train, it’s only a matter of time until retail investors follow suit.

Does that mean Innodata’s AI is flawless and peerless? Of course not. No company’s technology is at this early stage. But I highly doubt this is a company that’s bending any industry norms or engaging in egregious misrepresentation of their capabilities. The short report also highlights Innodata’s 12-month losses, but conveniently omits that the company has been profitable for the past two consecutive quarters. Overall, I think the story with this stock is much less black-and-white than the bears make it out to be.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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