The Appen Ltd (ASX: APX) share price is trading 5.7% higher on Thursday at $3.34.
That's an impressive 35% bump for the beaten-up ASX tech share over the past five trading days.
It's sure making Appen's current entitlement offer at $1.85 per share look more appealing!
By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is up 0.32% today and down 0.34% over the past week.
It was only a fortnight ago that the Appen share price descended to a seven-year low of $1.91.
What on Earth is going on?
Why is the Appen share price going up so much?
Well, the biggest reason is that it's riding some pretty impressive coat-tails!
The astounding surge in the share price of United States tech giant Nvidia Corporation (NASDAQ: NVDA) last week has led to dramatically improved market sentiment towards ASX artificial intelligence (AI) shares.
As my Fool colleague Mitchell reported, Nvidia shares rose up 24.3% in a single session on 25 May amid the company forecasting US$11 billion in revenue for the second quarter.
That forecast exceeded consensus expectations by more than 50%.
The reason for the ambitious revenue projection? The rise of AI.
Nvidia CEO and founder Jensen Huang said:
The computer industry is going through two simultaneous transitions — accelerated computing and generative AI.
A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.
Within a week, NVIDIA ascended to a market capitalisation of US$1 trillion (as shown below), making it part of a very small club of global mega stocks.
The Appen share price has surged by 50% since the Nvidia surge.
How is Appen involved in AI (and NVIDIA)?
Appen provides and improves data used for the development of machine learning and AI products.
Appen has been working with NVIDIA since 2020.
Early last month, Appen announced it was expanding its work with NVIDIA by combining its data services with the NVIDIA AI Enterprise platform.
This will enable businesses on the platform to create, implement, and customise real-time AI capabilities.
Previously, the focus has been on developing speech AI and language models.
The popularity of ChatGPT has highlighted the AI sector's potential. This appears to have piqued ASX investors' attention, particularly given the long runway AI seems to have.
According to Bloomberg, a Zion Market Research study tipped the AI market to expand at a compound annual growth rate (CAGR) of 39.4% to reach a value of US$422 billion by 2028.
At Appen's annual general meeting (AGM) last week, chair Richard Freudenstein said:
2022 was a breakthrough year for AI with the emergence of generative AI.
The evolution of large language models such as ChatGPT have created significant excitement around the future of AI.
Freudenstein added:
While we are energised by the potential of AI and generative AI, and what this could potentially mean for Appen – our immediate task is to reset the business.
Is a broader tech recovery underway as well?
Tech stocks have been killed by rising interest rates and inflation over the past 18 months.
Tech companies are typically highly leveraged, and these two economic macros are no good for them.
But things appear to be turning around this year.
The S&P/ASX All Technology Index (ASX: XTX) is up 20.8% in the year to date compared to a 2.4% bump for the S&P/ASX 200 Index (ASX: XJO).
The NASDAQ Composite (INDEXNASDAQ: .IXIC) is up 24.5% over the same period, and the BetaShares Nasdaq 100 ETF (ASX: NDQ) is up 36.6%.
The superior gains of the exchange-traded fund (ETF), which tracks 100 of the biggest tech shares on the NASDAQ, indicate the biggest companies are rebounding best.
Is any company news pushing the Appen share price up, too?
On 10 May, the company released a calamitous trading update that sent the Appen share price spiralling 28% in one day from $3.19 at the close on 9 May to $2.29 at the close on 10 May.
Then on 16 May, Appen announced a $60 million capital raising.
The news wasn't met with a lot of ASX investor enthusiasm. After the stock came out of a trading halt, it fell to a seven-year low of $1.91 but rebounded hard to finish the session at $2.31.
The retail entitlement allows ordinary investors to purchase one new Appen share per 6 Appen shares already held, for a price of $1.85. It closes on 6 June.
So, if you currently own 600 Appen shares, you can buy 100 more at $1.85 each.
The funds will pay for one-off costs associated with the company's cost reduction program, provide balance sheet flexibility, and general working capital to support its return to profitability.
On the day of the AGM, Appen released an investor presentation detailing its renewal strategy.
What do the brokers think of the Appen share price?
Wilsons issued a reasonably positive note this week.
As my Fool colleague James reported, Wilsons raised its rating on Appen to market-weight with an improved share price target of $2.54.
The broker believes Appen has assembled an impressive executive team.
Appen's new CEO and President Armughan Ahmad began working with the company in January.
Appen remains among the most shorted shares on the ASX with 8.2% of capital shorted by the pro traders.
However, this is a reduction from the 10.5% of the stock that was shorted earlier this month.
