The Appen Ltd (ASX: APX) share price is moving lower today despite announcing an investment in Mindtech.
Appen will pay £2.0 million (AU$3.6 million) for a minority stake in the company after Mindtech conducted a capital raise with other financial investors.
In addition to the cash injection, Appen has formed a strategic partnership agreement with the business.
How does Mindtech fit into Appen?
Currently, the Appen share price is down 4.37% to $6.78.
Mindtech provides synthetic data for creating training data for artificial intelligence (AI) computer vision models.
“Mindtech is the creator of Chameleon, a self-serve platform that enables customers to create and curate vast computer vision synthetic data assets used to build accurate neural networks”
“Mindtech’s customers include leading retailer and consumer electronics companies”
Synthetic data is created by computers and is an alternative real-life data source.
It’s particularly useful in edge applications. The synthetic data industry is expected to grow to $1.15 billion by 2027, representing a 48% annual growth rate.
Appen’s bread and butter is annotating real-world data. The business labels and classifies text, images and speech for use in training AI applications such as search engines.
Working with Mindtech will broaden Appen’s product offering for clients.
It also extends Appen’s plan to diversify away from its traditional annotation business into new industries and AI applications.
“The investment is a continuation of Appen’s strategy to deploy capital into product-led businesses that generate new and emerging sources of training data to support AI lifecycles”
Just in August, the business acquired Quadrant, a leader in mobile location and point-of-interest data.
What next for the Appen share price?
Given the S&P/ASX 200 (ASX: XJO) is down 1.26% today, the Appen share price fall is more likely attributed to the broader market move than the Mindtech investment.
Other tech shares are also down, such as SiteMinder Limited (ASX: SDR) and PEXA Group Ltd (ASX: PXA).
Overall, the business is clearly pivoting away from its core business towards higher growth areas.
Appen recently announced its goal to double revenue and achieve 20% earnings margins by 2026.
Management noted it would likely come at a cost to short-term results.
But today’s acquisition looks solid if Appen can integrate Mindreader into its product suite.
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