Appen Ltd (ASX: APX) shares are trading 13.46% higher at lunchtime on Friday at $3.71.
Over the past five trading days, the ASX tech share has stormed up the charts by a whopping 47%.
This is largely due to improved investor sentiment for companies in the artificial intelligence (AI) space.
Image source: Getty Images
What got this amazing week started for Appen shares?
Investors have been feeling very excited about ASX artificial intelligence shares this week.
This is on the back of United States AI chip maker Nvidia Corporation (NASDAQ: NVDA) wowing the world with its first-quarter results and second-quarter forecast of US$11 billion in revenue last week.
This forecast exceeded consensus expectations by 53%.
Nvidia's projected income mega-boost is all due to the rise of AI.
Nvidia CEO and founder Jensen Huang said:
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.
The Appen share price has surged by more than 60% since the Nvidia update on 25 May.
Appen provides the data used for the development of machine learning and AI products.
Nvidia is a client of Appen, and the companies have recently expanded their collaborative efforts.
But Appen says its immediate priority is resetting its business after a dreadful period.
Appen shares have retreated from above $38 per share in August 2022 to less than $4 today. Nightmare stuff for investors.
At Appen's annual general meeting last week, chair Richard Freudenstein said:
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.
Appen attracts big institutional investment
It is interesting to note that Appen has attracted some significant institutional investment in recent weeks.
This should give ordinary investors confidence in the future of the stock. The big boys don't invest millions of dollars of their clients' money in ASX shares they're not sure about.
Let's take a look at the recent 'insto' action.
According to an ASX lodgement on Tuesday, Spheria Asset Management has become a substantial holder of Appen shares. (Substantial holders own a 5% stake or more in a company).
Spheria participated in Appen's recent $21 million institutional placement, which is part of a wider $60 million capital raising.
Spheria bought 4.17 million new shares for a total consideration of just above $7.715 million.
It already owned Appen shares (it has been buying since February), but taking up the placement pushed its holding to 6.95%. Spheria now owns 9.76 million shares in total.
Also of note is the increased stakes taken out by two more institutional investors before the placement was announced.
State Street and Citigroup both bought millions of shares on 10 May.
That was the same day Appen released a trading update that sent its shares into a 28% tailspin.
Apparently, State Street and Citigroup saw a big opportunity in the share price dive.
Or, perhaps their purchases indicate faith in Appen's renewal strategy that was announced alongside the trading update.
State Street increased its stake in the company to 6.71% on 10 May. It became a substantial holder in mid-April with an initial 5.58% purchase.
Citigroup became a substantial holder on 10 May with a 5.31% stake.
Appen says the equity raising will fund one-off costs associated with its cost reduction program and provide balance sheet flexibility and general working capital.
The retail component of the capital raise closes very soon, on 6 June. The entitlement allows ordinary investors to purchase one new share per six Appen shares already held for $1.85 apiece.
That looks pretty appealing against the price that Appen is trading at this afternoon!
What do brokers think of Appen shares?
As my Fool colleague James reported, Wilsons has raised its rating on Appen shares to market weight.
It has also hiked its share price target on Appen to $2.54.
The broker believes Appen has put together an impressive executive team. That includes its new CEO and President Armughan Ahmad, who has only been in the job since January.
Pro traders have also been reducing their short positions in Appen shares, according to our latest most shorted shares report.
Appen is still among the top 10 most shorted shares on the ASX today. About 8.2% of its capital is shorted; however, this is a reduction from 10.5% earlier this month.
