Nvidia’s reveal of its stake in smaller AI firms has caused a rally in AI stocks, with significant gains seen in several companies. This move showcases Nvidia’s growing influence in the AI world, especially as the company’s market value continues to rise rapidly, making it the third most valuable U.S. company.
Nvidia’s largest investment, amounting to $147.3 million, is in Arm Holdings, a chip designer. This comes after Nvidia’s failed attempt to acquire Arm in an $80 billion deal two years ago due to antitrust concerns. Nvidia had shown interest in purchasing Arm shares during the British company’s Nasdaq debut last year. However, Arm’s shares dipped slightly after the disclosure of Nvidia’s stake.
In its 13F filing on Wednesday, Nvidia revealed its stakes as of December 31. This disclosure, typically associated with moves made by fund managers, is closely watched by investors. Gadjo Sevilla, an analyst at Insider Intelligence, suggests that Nvidia’s involvement in a diverse range of companies may allow them to develop more affordable and specialized chipsets for AI applications rather than expensive general-purpose AI chips.
Shares of Recursion Pharmaceuticals, a biotech firm that received a $76 million investment from Nvidia, rose by 5%. Nvidia invested in Recursion Pharmaceuticals to accelerate the training of the firm’s AI models for drug discovery. SoundHound AI, a developer of conversational voice assistants, also witnessed a significant surge in its shares, climbing by 50% to $3.33 after Nvidia invested nearly $3.7 million in the company.
Additionally, Nvidia acquired a stake in Nano-X Imaging, an Israel-based medical device company that utilizes AI software for report analysis. Nano-X saw its shares increase by 52%. Another beneficiary of Nvidia’s investment was TuSimple Holdings, an autonomous driving technology company that recently delisted from the Nasdaq. TuSimple received $3 million in capital from Nvidia.
Investors have viewed Nvidia’s involvement as a positive, as it provides potential opportunities for companies to raise capital. According to Rick Meckler, a partner at Cherry Lane Investments, Nvidia’s investments indicate a portfolio strategy where both winners and losers are expected.
Retail traders have also joined in the race, with SoundHound and Nano-X Imaging ranking among the top five most actively traded stocks by individual investors, according to J.P. Morgan data. Shares of other micro-cap AI firms, such as Guardforce AI and BigBear.ai Holdings, also experienced gains.
Furthermore, renowned funds like Rokos Capital Management and Bridgewater Associates have invested in Nvidia towards the end of 2023, as stated in Nvidia’s regulatory filing.
In conclusion, the revelation of Nvidia’s stake in smaller AI firms has sparked a rally in AI stocks, highlighting the company’s increasing influence within the AI industry. The investments made by Nvidia indicate a portfolio approach, providing opportunities for capital-raising and potential winners in the AI market.
