Up 53% in a week! Appen Limited's AI potential well understood by institutional investors

Team Kalkine

02 June 2023 07:00 PM AEST

Up 53% in a week! Appen Limited's AI potential well understood by institutional investors

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Appen (ASX: APX) stock surged 53.45% in five sessions through Friday (2 June 2023).

Appen has been at the forefront of AI for over 25 years.

It provides AI products and services to many of the world’s top tech companies.

Artificial intelligence (AI) data services company Appen Limited (ASX: APX) announced a strategy refresh on 10 May 2023, along with its trading update for the four months ending 30 April 2023. On 10 May, the stock tanked over 28% to end at AUD 2.226 as market participants reacted to only its trading update and not the strategy refresh, which highlighted the revenue generation potential of Generative AI that is expected to grow to a USD 110 billion market by 2030 from just USD 8 billion in 2021, as per the company.

But Appen's AI potentials were well understood by a few institutional investors such as State Street and Citigroup, who took advantage of the correction on 10 May and increased their stake in the company. State Street increased its shareholding in Appen to 6.71% on 10 May from 5.58% earlier, while Citigroup became a substantial holder in the company by grabbing a 5.31% stake on 10 May.

For the uninitiated, to become a substantial holder in a company, a shareholder needs to hold a minimum of 5% stake.

Worth mentioning here is that Appen has been at the forefront of AI for over 25 years. It provides AI products and services to many of the world’s top tech companies. Appen believes that the AI foundation models will play an important role in top tech companies’ strategies over the next few years.

Not only State Street and Citigroup but other institutional investors like Spheria Asset Management seem to have understood the revenue potential that Generative AI can bring in for Appen. As per the tech company's announcement on Tuesday (30 May), Spheria became a substantial shareholder with a 6.95% stake. Spheria participated in the recently concluded institutional placement of Appen.

Market participants started taking interest in APX only when AI chip maker Nvidia Corporation surprised the market with its Q1 earnings and forecast for Q2 on 25 May 2023. On that day, APX shares rose 8.5% and it was followed up by subsequent buying, taking the stock 53.45% higher in just five sessions through Friday (2 June 2023). On Friday itself, Appen shares jumped nearly 15% to close at AUD 3.760. Appen shares have rallied almost 69% since 25 May 2023.

Nvidia is also a client of Appen, and both entities have expanded their collaboration of late. Although it is too early to comment on whether Appen's AI strategy will help the company gain its lost fortune, market participants seem to be optimistic about the company, looking at its recent share price gain.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, is 2 June 2023. The reference data in this report has been partly sourced from EODHD/Others.

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