Introduction

Nvidia, the tech giant renowned for its cutting-edge graphics processing units (GPUs), has been on an impressive growth trajectory. Over the past 18 months, Nvidia’s market capitalization has skyrocketed from $360 billion to over $2.2 trillion, placing it as the third-largest company globally, trailing only Apple and Microsoft. This meteoric rise is largely attributed to the company’s focus on artificial intelligence (AI), particularly in data centers where its GPUs are indispensable for AI model development and deployment.

The Power of AI in Nvidia’s Success

The surge in Nvidia’s data center revenue, which jumped 217% in fiscal 2024, underscores the immense value of AI. As AI continues to expand its footprint across various industries, Nvidia is leveraging its financial prowess to invest in promising AI companies. Let’s explore the five AI stocks Nvidia recently acquired and the potential they hold.

1. Arm Holdings: The Largest Investment

Nvidia’s most significant investment, approximately $147 million, went into Arm Holdings. Arm designs processors for major chip companies worldwide. This investment reflects Nvidia’s strategy to strengthen its position in the semiconductor industry, which is foundational for AI hardware development.

2. Recursion Pharmaceuticals: Accelerating Drug Discovery

Recursion Pharmaceuticals uses AI to speed up the drug discovery process. By analyzing vast amounts of biological data, Recursion aims to identify potential drug candidates more efficiently. Nvidia’s investment in Recursion highlights the growing intersection of AI and healthcare, promising faster and more effective treatments.

3. Nano-X Imaging: Advancing Medical Imaging

Nano-X Imaging employs AI to enhance medical imaging, improving patient outcomes by providing clearer and more accurate diagnostic images. This investment aligns with Nvidia’s commitment to advancing healthcare technologies through AI, potentially revolutionizing how medical professionals diagnose and treat diseases.

4. TuSimple Holdings: Pioneering Autonomous Driving

TuSimple Holdings is a developer of autonomous driving technologies for the trucking industry. With AI at its core, TuSimple aims to make long-haul trucking safer and more efficient. Nvidia’s investment supports the advancement of AI in transportation, a sector poised for significant disruption.

5. SoundHound AI: A Soaring Performer

SoundHound AI specializes in conversational AI technologies. Its stock has soared 160% in 2024, making it Nvidia’s standout performer. SoundHound’s technology is used by major restaurant chains like Applebee’s and Chipotle to take orders, reducing employee workload. It also powers voice assistants in cars from manufacturers like Mercedes-Benz and Hyundai.

The Future Potential of SoundHound AI

SoundHound AI’s innovative approach to voice recognition and conversational AI positions it as a leader in the field. Its technology extends beyond restaurants and vehicles, partnering with Nvidia Drive to create a robust voice assistant for autonomous vehicles that does not require internet connectivity, enhancing privacy and security.

SoundHound reported $11.6 million in revenue for Q1 2024, a 73% increase from the previous year. While still in its growth phase, the company expects to reach $71 million in revenue for the full year, marking a 55% year-over-year growth. Its order backlog, valued at $682 million, indicates strong future revenue potential.

The Financial Landscape and Investment Risks

Despite its impressive growth, SoundHound faces financial challenges, including a $33 million loss in Q1 2024. With $226 million in cash reserves, the company is investing heavily to scale its operations. Management is optimistic about achieving profitability by 2025, but this remains uncertain.

Nvidia’s investment in SoundHound, worth around $9 million, is relatively small compared to its $2.2 trillion market cap. While this might seem insignificant for Nvidia, it underscores the potential Nvidia sees in SoundHound’s technology.

What’s Next

Nvidia’s strategic investments in AI companies reflect its commitment to driving innovation across various sectors, from healthcare to autonomous driving. These investments not only bolster Nvidia’s technological capabilities but also pave the way for advancements that can significantly impact our daily lives.

For investors, following Nvidia’s lead in these AI stocks could be rewarding, but it’s crucial to consider the associated risks. Companies like SoundHound offer substantial growth potential but come with significant financial challenges. As always, careful consideration and a balanced investment approach are essential.