The stock prices of smaller artificial intelligence (AI) companies surged on Thursday following revelations that Nvidia, the world’s leading AI chipmaker, had acquired stakes in them, providing insights into its growth strategy.
Nvidia’s expanding influence in the AI sector is evident as its market value continues to soar, solidifying its position as the third most valuable U.S. company. The company’s largest investment, totaling $147.3 million, was directed towards Arm Holdings, a chip designer that Nvidia attempted to acquire for $80 billion two years ago, only to face antitrust obstacles.
Although Nvidia’s disclosure of stakes, as of December 31, in a 13F filing late on Wednesday, is typically associated with moves made by fund managers, rather than public companies, its implications were significant. Analysts noted that Nvidia’s involvement in various firms could enable the development of more affordable and specialized chipsets tailored for specific AI applications, as opposed to costly general-purpose AI chips.
Shares of biotech firm Recursion Pharmaceuticals, which received nearly $76 million in investment from Nvidia, rose by 5%. Last year, Nvidia had announced plans to invest in Recursion to expedite the training of the firm’s AI models for drug discovery.
Similarly, conversational voice assistant developer SoundHound AI experienced a surge of 50% in its shares after Nvidia invested approximately $3.7 million. Nvidia also acquired a stake in Nano-X Imaging, an Israel-based medical device company utilizing AI software for report analysis, resulting in a 52% increase in Nano-X shares.
Autonomous driving technology company TuSimple Holdings, which recently delisted from the Nasdaq, received $3 million in capital from Nvidia.
Investors viewed Nvidia’s investments favorably, considering them a positive signal for the recipient companies’ prospects. However, analysts cautioned that Nvidia’s portfolio approach might result in both successes and failures among the invested firms.
Retail traders also joined the fray, with SoundHound and Nano-X Imaging emerging as among the top five most actively traded stocks by individual investors, according to J.P. Morgan data. This trend spurred a collective rise in the stock prices of other micro-cap AI firms, including Guardforce AI and BigBear.ai Holdings.
Nvidia’s regulatory filing also revealed investments from prominent funds like Rokos Capital Management and Bridgewater Associates towards the end of 2023, further underlining investor confidence in Nvidia’s strategic direction.