What a year it's been for Appen Ltd (ASX: APX) shares. After a difficult first half, the stock is now up nearly 315% in 2024.
This comes after a 21% jump in the past week alone.
But the major move came in August, when shares spiked from 43 cents to their highs of $2.87 apiece by November, a 567% increase.
The question now is whether Appen shares can sustain their momentum into 2025. With the growing demand for artificial intelligence (AI), let's take a look at where Appen sits for the new year.
Image source: Getty Images
Appen shares ride the AI boom
Appen's core business provides labelling and human-annotated data to train AI models. This places it at the centre of the AI trend. Why?
These models, algorithms, or whatever you may call them, need swaths of data to operate and scale.
Without data, there is no AI. According to Forbes, "data is the lifeblood that fuels AI algorithms, allowing them to learn, adapt, and make decisions."
For this reason, software developer Syndcode also says the focus for AI companies will be "acquiring, refining, and managing high-quality data" moving forward.
And with global spending on AI forecast to explode, I think Appen might be well positioned.
The International Data Corporation (IDC) forecasts global AI spending to grow at a compounding rate of 28% through to 2028, expected to pass US$300 billion annually by 2026.
Meanwhile, US Goldman Sachs analysts say global investors have become "increasingly confident about the future revenues" of what it calls AI software "enablers," which Appen fits into.
And the proof might already be in the investment pudding for the company.
Despite losing a major client in Google, Appen reported a 16% revenue increase (excluding Google) in its Q2 2024 update, posted in August.
Revenues then grew 35% the following quarter, excluding Google again.
CEO Ryan Kolln said Appen has now become "a crucial source of data for many leading model builders."
Will Appen shares continue this momentum?
This year's surge in Appen shares is underscored by the 1-2-knockout combo of improved financials and the global AI boom.
In its Q3 2024 update, posted in October, the company also posted pre-tax profit of US$600,000.
This is a sharp turnaround from the US$7.2 million loss it posted at the same time a year ago.
The catalyst? The company attributed it to growth in multiple generative AI projects.
Management's focus is now on growing the business whilst staying profitable.
Meanwhile, brokers are bullish on the stock for 2025. According to CommSec, the consensus of analyst estimates rates Appen shares a buy.
This contrasts with its August Q2 financials when consensus rated it a hold.
In any case, Appen has a lot of work to do. Continued investment in growth and execution of its strategy are also critical, in my view.
Foolish takeaway
Appen shares can't be overlooked for their stellar rise in 2024. This is largely thanks to AI-related tailwinds, where investors are betting big.
Looking ahead to 2025, Appen might be worth a closer look for those bullish on the AI space.
This past year, Appen is up more than 286% against the S&P/ASX 200 index (ASX: XJO).
