Nvidia (NASDAQ: NVDA) Samsung is one of the most closely watched companies in the world. It was once known as a major supplier of gaming GPUs for personal computers, but has since evolved into the dominant producer of high-end data center GPUs.
Nvidia now generates most of its revenue from its data center GPUs, and demand for these chips continues to outstrip supply as artificial intelligence (artificial intelligence) The market is expanding. That’s why its stock has risen more than 3,000% over the past five years, and why it’s a major focus and indicator for the AI industry.
Nvidia can still have a lot going for it. Running room As more companies launch AI applications, the chipmaker has also been buying up shares of smaller AI companies. Let’s take a look at five of these investments and see if they could have a place in your portfolio.
Which five stocks did Nvidia invest in?
In a 13F filing earlier this year, Nvidia disclosed its investments in five companies as of December 31, 2023: Sound Hound AA (NASDAQ: SON), Arm Holding (NASDAQ: ARM), Recorsion Pharmaceutical Company (NASDAQ: RXRX), Nano-X imaging (NASDAQ: NNOX)And Tosimple Holding CompanyHere’s how much Nvidia has invested in each of these companies, and how much their stock has risen or fallen since this disclosure.
|
a company |
Purchased shares |
Market value 12/31/2023 |
Market value 7/6/2024 |
profit (loss) |
|---|---|---|---|---|
|
Sound Hound AA |
1,730,883 |
$3.67 million |
$7.25 million |
98% |
|
Arm Holding |
1,960,784 |
$147.34 million |
$355.27 million |
141% |
|
Recorsion Pharmaceutical Company |
7,706,363 |
$75.98 million |
$56.41 million |
(26%) |
|
Nano-X imaging |
59,632 |
$0.38 million |
$0.41 million |
8% |
|
Tosimple Holding Company* |
3,465,372 |
$3.04 million |
$0.87 million |
(71%) |
Source: Nvidia. *TuSimple delisted from Nasdaq and moved to the OTC market in January 2024.
Some of these bets are more speculative than others.
SoundHound AI and Arm saw much bigger gains than the other three stocks. SoundHound develops voice and speech recognition technologies, and its Houndify platform has been used to create custom audio tools for automakers like HyundaiSmart TV makers like Physioand fast food chains like Church’s Chicken.
Arm designs power-efficient chips used in about 99% of the world’s premium smartphones. Qualcommmediatech, and apple All of them license Arm designs for their mobile chips. Nvidia also licenses Arm designs for its Tegra CPUs, which are used in set-top boxes, NintendoSwitch panels, automotive infotainment systems.
Nvidia has long been bullish on both companies. It was an early investor in SoundHound when it was a startup, and nearly acquired Arm for $40 billion before antitrust regulators killed the deal in 2022.
Recursion, Nano-X and TuSimple are smaller, more speculative companies. Recursion uses AI algorithms to process drug discovery tests, Nano-X makes digital X-ray sources and develops AI tools to identify undetected chronic diseases, and TuSimple is a Chinese company that makes self-driving delivery trucks.
Which of these stocks is worth buying?
Of these five companies, only Arm generates consistent earnings according to generally accepted accounting principles (GAAP). Therefore, it is easier to compare these five stocks using revenue growth estimates and company values.
|
a company |
Revenue (last fiscal year) |
project value |
Enterprise Value to Revenue Ratio (Current Fiscal Year) |
Estimated CAGR (for the next two fiscal years) |
|---|---|---|---|---|
|
Sound Hound AA |
$45.9 million |
$1.3 billion |
20 |
50% |
|
Arm Holding |
$3.2 billion |
$185.1 billion |
47 |
23% |
|
Recorsion Pharmaceutical Company |
$44.6 million |
$1.6 billion |
27 |
19% |
|
Nano-X imaging |
$9.9 million |
$395.3 million |
25 |
130% |
|
Tosimple Holding Company |
$0.3 million |
$60.9 million |
198 |
Unavailable* |
Data source: Marketscreener. *Due to delisting from NASDAQ. CAGR.
None of these stocks look cheap right now, but SoundHound seems to be the most reasonably valued relative to its growth potential. Arm has a more stable business, but its value has been inflated by the AI buying frenzy.
Recursion and Nano-X are developing promising technologies, but have yet to scale. As for TuSimple, the self-driving transportation company has been caught in the crossfire of the escalating tech war between the US and China, and voluntarily delisted from the Nasdaq earlier this year. That lack of visibility, coupled with its heavy losses and sky-high valuation, makes it hard to recommend.
Should you go with Nvidia?
These five stocks represent small investments for Nvidia, which ended the fourth quarter with $7.59 billion in cash and equivalents. The graphics processing unit giant wouldn’t worry too much if one of these companies went under, but growth investors should stick with the two most established companies — Arm and SoundHound — and simply keep an eye on the more speculative ones for now.
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Leo The Motley Fool has positions in Apple and Nintendo. The Motley Fool has positions in and recommends Apple, Nvidia, and Qualcomm. The Motley Fool recommends Nintendo. The Motley Fool has Disclosure Policy.
NVIDIA Is Buying These 5 AI Companies. Should You Do the Same? Originally posted by The Motley Fool
