©Reuters.InnoData (INOD) plunges 30% after Wolfe Research shorts stock
Wolfe Research announced Thursday that it is shorting Innodata, Inc. (INOD), criticizing the company for overemphasizing itself as an AI pioneer among the world's largest companies.
Rather, the research firm sees it as a “declining manual data entry business driven by offshore labor rather than innovation.”
INOD stock plunged more than 30% on Thursday.
“INOD previously disclosed R&D expenses in its quarterly earnings press releases, but apparently INOD's R&D expenses were so low that the company stopped disclosing them completely starting in the first quarter of 2021.” writes.
Innodata's total investment in research and development (R&D) over the past five years was just $4.4 million, and in 2023, the company spent the most of its R&D allocation on press releases touting its “AI” technology. Wolf said it's even less than that amount.
“INOD’s business has been in slow decline over the past two decades as automated data annotation has made the traditional business of offshoring manual data annotation less relevant and consistently unprofitable. We don't have the funds to say, pivot to AI and other things.”
The research firm claims to have spoken to a former senior employee at Innodata, who allegedly described the company's AI as “smoke and mirrors.”
Another former employee suggested the company's depiction of AI was simply an attempt to romanticize reality, likening it to “putting lipstick on a pig,” Wolf Research said in the report. .
“INOD does not look like a technology company, much less an AI company.
We don't even have a chief technology officer.”
“INOD claims that its AI platform, Goldengate, powers most of its activities, but our analysis shows that Goldengate is a rudimentary software developed by only a handful of employees. It's software.”
