Over any meaningful time span, Nvidia (NASDAQ: NVDA) has been a blockbuster investment. It’s up almost 1,800% over the past five years, and it has greater than tripled thus far yr alone, fueled by investors’ excitement for artificial intelligence (AI).
There’s good reason to assume Nvidia is a top AI stock. Management attributes its surging revenue to AI-related services and products. For instance how strong demand is, the company expects to report revenue of $20 billion in its fiscal 2024 fourth quarter. That will likely be a 231% year-over-year increase — simply astounding for a company of this size.
AI is the best investment trend directly, and Nvidia stock is certainly one of the favored ways to ride the trend higher. Nevertheless, for its part, the company is buying shares of 5 other AI corporations.
This interesting development made the news on Feb. 14 with Nvidia’s first 13F filing with the Securities and Exchange Commission. This sort is for institutional investment managers to report their stock holdings.
Based on its 13F, Nvidia has a stock portfolio price $230 million, and these are the AI stocks it has been buying.
A glimpse inside Nvidia’s stock portfolio
Nvidia’s 13F shows it owns only five stocks, but all five have a connection to AI in some capability. Here’s a quick overview of each company, from the most important investment right all the way down to the smallest.
-
Arm Holdings (NASDAQ: ARM) licenses its AI semiconductor chip designs to other corporations, and this business is in high demand directly. Nvidia tried to amass Arm back in 2020 but finally called it off in 2022 after pushback from regulators. Now, it should look to learn as an investor. That’s Nvidia’s largest stock position, valued at $147 million as of the SEC filing.
-
Next in Nvidia’s portfolio is Recursion Pharmaceuticals (NASDAQ: RXRX). This early-stage biotechnology company is using AI models to process genetic data and find recent drugs. It’s an idea which will thoroughly be game-changing for the medical field, which is why the stock has also caught the attention of growth investor Cathie Wood.
-
SoundHound AI (NASDAQ: SOUN) offers an AI voice assistant that’s very like what’s already offered by major tech corporations. Nevertheless, SoundHound AI believes its AI is more in a position to understanding normal language. And based on its growing customer list, there appears to be support for management’s claim.
-
Of Nvidia’s stocks, investors might want to disregard TuSimple Holdings, considering it’s delisting from the Nasdaq. That said, this company has an AI angle as well — it’s working to enable autonomous driving for trucking corporations.
-
Finally, Nano-X Imaging (NASDAQ: NNOX) — or just Nanox — is Nvidia’s smallest stock position. This company hopes to transition the world to a recent digital X-ray technology. It intends to utilize AI to undergo these digital images and find patterns that doctors might overlook, resulting in higher outcomes for patients.
With reference to AI stocks, I personally imagine the trend, as an entire, is overhyped. And stock market history is affected by past trends that eventually fizzled out. As a consequence of this fact, investors need to be discerning.
That said, I feel AI can unlock a great deal of possibilities in relation to the medical field. That’s the reason I’m particularly intrigued with Nvidia’s investments in Recursion Pharmaceuticals and Nanox.
These two stocks are particularly high-risk and high-reward
Full disclaimer before I’m going any further: I’m not a health worker throughout the slightest. I’m only a day by day investor on the skin looking in. Investing great Warren Buffett says to stay inside your circle of competence. And fellow great Peter Lynch says to invest in what . Medical stocks aren’t that for me.
Nevertheless, I do know enough to know datasets are enormous on this field, and processing large amounts of data is where AI really shines.
Consider one among Recursion Pharmaceutical’s newest partnerships for instance. Inside the third quarter of 2023, it partnered with Tempus to realize access to twenty additional petabytes (over 20,000,000 gigabytes) of oncology data. It now has a staggering 50 petabytes at its disposal for cancer research. And to process this much information, the company will keep working with Nvidia to make its BioHive-1 supercomputer more powerful.
Nanox only has a limited number of medical devices in operation directly. But when it went public in 2020, the company hoped to eventually deploy 15,000 machines, which could make greater than 150 monthly digital scans each.
Nanox stays to be an excellent distance from that goal, and it would never get there. But hitting its goals would represent nearly 2.3 million medical images per 30 days. This might quickly change into the most important medical-imaging dataset on this planet, and the company might need to use AI to make any type of discovery.
Recursion Pharmaceuticals and Nanox wish to make use of AI to unlock crucial medical breakthroughs through using enormous medical datasets. That’s the reason I say these two stocks have enticing upside.
That said, each Recursion Pharmaceuticals and Nanox have meager revenue streams and large losses, since the chart below shows.
Recursion Pharmaceuticals and Nanox are very high-risk stocks, and investing in them mustn’t be taken calmly. Each have an elevated likelihood of failing, and Nvidia’s investment in them shouldn’t be viewed as something that guarantees success.
It’s exciting to consider what could occur if things go right, and AI leads these two corporations to major breakthroughs. Investors just need to keep their emotions in check, fully recognizing the risks that include these stocks.
Must you invest $1,000 in Nvidia directly?
Before you buy stock in Nvidia, consider this:
The Motley Idiot Stock Advisor analyst team just identified what they imagine are the 10 best stocks for investors to buy now… and Nvidia wasn’t one among them. The ten stocks that made the cut could produce monster returns within the approaching years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on constructing a portfolio, regular updates from analysts, and two recent stock picks every month. The Stock Advisor service has greater than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 12, 2024
Jon Quast has positions in Nano-X Imaging. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot recommends Nasdaq. The Motley Idiot has a disclosure policy.
Investors Are Piling Into Nvidia Stock. But Nvidia Is Investing in 5 Other AI Stocks. was originally published by The Motley Idiot