Nvidia Invests in 5 AI Firms: Should You Follow?
Earlier this year, $NVIDIA Corp(NVDA)$ disclosed in its 13F filing that as of December 31, 2023, it had invested in five AI companies: $SoundHound AI Inc(SOUN)$ $ARM Holdings Ltd(ARM)$ $Recursion Pharmaceuticals, Inc.(RXRX)$ $Nano-X Imaging Ltd.(NNOX)$ $TuSimple Holdings Inc.(TSPH)$.
Here's a detailed analysis of these five companies' investment specifics and their stock performance since disclosure:
*TuSimple delisted from NASDAQ in January 2024 and moved to over-the-counter trading
Diverse Risks and Returns
Among these AI companies, SoundHound and Arm have notably outperformed the others. SoundHound specializes in audio and voice recognition technology, with clients like modern car makers, smart TV producer Vizio, and fast-food chain Church's Chicken using its Houndify platform to create customized voice tools.
High-efficiency chips designed by Arm are used in about 99% of the world's high-end smartphones, with customers including $Qualcomm(QCOM)$ $Apple(AAPL)$ MediaTek, and NVIDIA's Tegra CPU is also based on Arm's architecture.
It's worth noting that NVIDIA has long been bullish on both companies. NVIDIA was one of SoundHound's earliest investors when it was still a startup. In 2022, the planned $40 billion acquisition of Arm fell through due to antitrust concerns.
In contrast, Recursion Pharmaceuticals, Nano-X Imaging, and TuSimple are smaller and more speculative in scale. Recursion accelerates drug discovery with AI algorithms, Nano-X produces digital X-ray sources, and AI tools for chronic disease screening, while TuSimple is a Chinese autonomous truck company.
Are these stocks worth buying?
Among these five companies, only Arm has achieved sustained profitability under U.S. Generally Accepted Accounting Principles (GAAP). Therefore, comparing revenue growth expectations with enterprise value makes more sense.
*Estimated compound annual growth rate (CAGR) not provided due to delisting from NASDAQ. CAGR = Compound Annual Growth Rate
While none of these stocks are currently cheap, SoundHound's valuation might be the most reasonable relative to its growth potential.
Arm's stable business has driven up its valuation amidst the AI stock frenzy. Recursion and Nano-X are developing promising technologies but have yet to achieve scalable operations.
As for TuSimple, the self-driving truck company has been implicated in the Sino-US tech tensions, lack of transparency, significant losses, and high valuation make it a risky investment.
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