Nvidia’s Stake in Smaller AI Firms Sends Shares Soaring
Shares of smaller AI firms experienced a sharp rally on Thursday as Nvidia, the world’s leading artificial intelligence chipmaker, disclosed its stake in them, providing insights into its growth strategy. This surge in stocks highlights Nvidia’s growing influence in the AI industry, as its market value continues to skyrocket, making it the third most valuable company in the United States.
Among its investments, Nvidia’s largest stake of $147.3 million was in Arm Holdings, a chip designer. This investment comes after Nvidia’s failed attempt to acquire Arm Holdings two years ago due to antitrust concerns surrounding the proposed $80 billion deal. Despite this setback, Nvidia had expressed interest in purchasing Arm shares during the British company’s Nasdaq debut last year. The stock price of Arm, which had surged more than 60% over the past week due to a strong forecast, dipped slightly by 0.5% on Thursday.
Nvidia revealed its stakes as of December 31 in a 13F filing released on Wednesday. This regulatory disclosure, closely monitored by investors, is usually associated with moves made by fund managers rather than public companies. Analyst Gadjo Sevilla from Insider Intelligence suggests that Nvidia’s involvement in various companies could allow it to develop more affordable and specialized chipsets instead of expensive general-purpose AI chips.
The stocks of biotech firm Recursion Pharmaceuticals, in which Nvidia invested nearly $76 million, rose by 5%. Last year, Nvidia had announced its investment in Recursion Pharmaceuticals to accelerate the training of the Utah-based company’s AI models for drug discovery. Similarly, the shares of conversational voice assistants developer SoundHound AI surged by 50% to $3.33 after Nvidia invested approximately $3.7 million in the company.
Nvidia also acquired a stake in Nano-X Imaging, an Israel-based medical device company that utilizes AI software for report analysis. Consequently, Nano-X Imaging shares increased by 52%. Additionally, autonomous driving technology company TuSimple Holdings, which recently delisted from Nasdaq, received $3 million in capital from Nvidia.
Rick Meckler, a partner at Cherry Lane Investments, noted that an Nvidia investment is seen as a positive sign by investors and can assist companies in raising capital. Meckler added that Nvidia’s investments indicate a portfolio approach where both winners and losers can be anticipated.
SoundHound shares emerged as the most actively traded stocks across U.S. exchanges, with approximately 160 million shares changing hands by 11:30 a.m ET, according to LSEG data. Even retail traders eagerly joined the race, as SoundHound and Nano-X Imaging ranked among the top five most actively traded stocks among individual investors, according to J.P. Morgan data.
Other micro-cap AI firms experienced a parallel surge in share prices, with Guardforce AI recording an 11% increase and BigBear.ai Holdings enjoying a 10.3% gain.
Nvidia’s regulatory filing also revealed investments from well-known funds such as Rokos Capital Management and Bridgewater Associates, both of which invested in the chipmaker towards the end of 2023.
Nvidia’s foray into smaller AI firms demonstrates its commitment to expanding its influence and presence in the industry. As this leading chipmaker continues to invest in emerging companies, the AI landscape can expect further developments and breakthroughs that demonstrate the potential of this rapidly evolving technology.
(Reporting by Medha Singh in Bengaluru, Additional reporting by Bhanvi Satija and Johann Cherian; Editing by Arun Koyyur)
