Over the preceding five-year period, Nvidia (NASDAQ: NVDA) has been a star performer in the investment realm, soaring nearly 1,800%. In the past year alone, it has tripled in value, largely buoyed by the euphoria surrounding artificial intelligence (AI).
Nvidia has staked its claim as a top AI stock, with its management attributing skyrocketing revenue to AI-related products and services. Remarkably, the company anticipates reporting a staggering $20 billion in revenue for its fiscal 2024 fourth quarter, signifying a remarkable 231% year-over-year surge for a company of its scale.
AI is currently the hottest investment trend, and Nvidia’s stock is among the most sought-after vehicles to ride this trend higher. However, Nvidia itself, to everyone’s surprise, has been aggressively acquiring shares in five other AI companies.
This unusual revelation came to light on Feb. 14 through Nvidia’s initial 13F filing with the Securities and Exchange Commission, which institutionally obliges investment managers to divulge their stock holdings.
According to the 13F, Nvidia wields a stock portfolio valued at $230 million, and here are the AI stocks it has been amassing.
Nvidia’s AI-Driven Stock Portfolio Unveiled
Nvidia’s 13F unveils a roster of only five stocks, all interlinked with AI in some form or another. Here’s a swift overview of each company, starting with the largest investment down to the smallest.
- Arm Holdings (NASDAQ: ARM) licenses its AI semiconductor chip designs to other companies, and this sector is currently in high demand. Nvidia’s failed attempt to acquire Arm back in 2020, due to regulatory hurdles, has led it to adopt an investment stance. This constitutes Nvidia’s largest stock position, valued at $147 million as of the SEC filing.
- Following Arm Holdings is Recursion Pharmaceuticals (NASDAQ: RXRX). This early-stage biotech firm employs AI models to process genetic data and unearth new drugs, attracting the interest of growth investor Cathie Wood owing to its groundbreaking potential in the medical domain.
- SoundHound AI (NASDAQ: SOUN) offers an AI voice assistant akin to those provided by major tech companies. However, SoundHound AI asserts that its AI is more adept at interpreting natural language, a claim seemingly supported by its expanding customer base.
- While TuSimple Holdings, with its delisting from the Nasdaq, may seem irrelevant, it also boasts an AI orientation as it endeavors to facilitate autonomous driving for trucking companies.
- Lastly, Nano-X Imaging (NASDAQ: NNOX) — or simply Nanox — represents Nvidia’s most modest stock position. The company aspires to revolutionize the world with a novel digital X-ray technology, leveraging AI to scrutinize these digital images and discern patterns that may elude the scrutiny of physicians, ultimately leading to enhanced patient outcomes.
Regarding AI stocks, the prevailing trend is, in my view, overhyped, and history is replete with past trends that ultimately fizzled out. Therefore, the onus falls on investors to exercise prudence.
That being said, AI has the potential to unlock myriad medical possibilities, which is why I am particularly intrigued by Nvidia’s stakes in Recursion Pharmaceuticals and Nanox.
The Duality of High-Risk, High-Reward
Before delving further, a full disclosure: I lack expertise in the medical domain. I am merely a regular investor observing from the sidelines. Warren Buffett, a stalwart in the field of investing, advises staying within one’s circle of competence, and the esteemed Peter Lynch preaches investing in what one understands. Medical stocks do not fall within my purview.
However, I comprehend that the volume of data in this field is gargantuan, and AI truly excels in processing copious amounts of data.
Take, for instance, Recursion Pharmaceuticals’ recent collaboration. In the third quarter of 2023, it partnered with Tempus to access an additional 20 petabytes (over 20,000,000 gigabytes) of oncology data. It now commands a staggering 50 petabytes for cancer research. To handle this deluge of data, the company will continue to collaborate with Nvidia to enhance the power of its BioHive-1 supercomputer.
While Nanox currently operates a restricted number of medical devices, it aspired, upon its 2020 public listing, to deploy 15,000 machines, capable of conducting over 150 digital scans each per month.
Nanox is still distant from this objective and may never reach it. However, achieving this goal would represent nearly 2.3 million medical images monthly, potentially establishing the world’s largest medical-imaging dataset, necessitating AI exploitation for any significant discoveries.
Recursion Pharmaceuticals and Nanox aim to leverage AI in unlocking pivotal medical breakthroughs using extensive medical datasets. Hence, I posit that these two stocks offer enticing upside potential.
That notwithstanding, both Recursion Pharmaceuticals and Nanox exhibit paltry revenue streams and substantial losses, as evinced by the chart below.
Data by YCharts.
Recursion Pharmaceuticals and Nanox embody very high-risk stocks, and investing in them warrants grave consideration. Both carry an augmented probability of faltering, and Nvidia’s investment in them should not be misconstrued as a veritable guarantee of success.
Contemplating the potential if things play out favorably, with AI propelling these two entities toward momentous breakthroughs, investors must temper their excitement and grasp the attendant risks tied to these stocks.
Should you invest $1,000 in Nvidia right now?
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Jon Quast has positions in Nano-X Imaging. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
