Nvidia owns these five stocks, should you?
20th February 2024
Welcome to AI Collision 💥,
In today’s collision between AI and our world:
Five companies that Nvidia owns
Spaghetti to Hollywood
Mario throat cancer
If that’s enough to get the stocks pumping, read on…
AI Collision 💥 what are the five AI companies Nvidia owns?
Nvidia’s current market capitalisation is $1.8 trillion.
The company pulled in $18 billion in revenue in its latest reported quarterly earnings. Net income was $9.2 billion. Nvidia also held $18.2 billion in cash and cash equivalents.
Of course, there’s no way it’d go out and spend all that cash just because it has it there. There’s a big chunk of it no doubt, “for a rainy day”.
But a company like Nvidia does use some of the billions in cash that it makes to invest into its future.
That typically comes in the way of research and development (R&D) to develop new products to sell in the future. As an example, Nvidia spent $2.2 billion in R&D for its third quarter 2023.
But a company like Nvidia also invests in other companies too. That could be for a number of reasons. Maybe it’s a technology it wants to support development of but leave to someone else. Maybe it’s to help sure up something like supply. Maybe it’s to take a vested interested in something or maybe it’s to eliminate competition.
Whatever the reason, if you’ve got a company like Nvidia backing you, it’s a sign to the market you’ve got some value in your company – perhaps value unseen by everyone else.
That’s why when last week Nvidia disclosed some of the companies it has a current stake in (as of 31 December 2023), some of them took off like a rocket.
First things first, what are these companies Nvidia disclosed? And how much does Nvidia actually own (plus value at the time of writing)?
ARM Holdings – 1,960,784 shares ($262 million)
Nano X Imaging Ltd – 59,632 shares ($379,856)
Recursion Pharmaceuticals Inc – 7,706,363 ($95.7 million)
SoundHound AI Inc – 1,730,883 shares ($6.5 million)
TuSimple Holdings Inc – 3,465,372 shares ($3 million)
Nano X and TuSimple aren’t listed. Well, TuSimple was, but it cancelled its Nasdaq listing at the start of the month.
But for ARM, Recursion and SoundHound, if these stocks are good enough for Nvidia, are they good enough for you?
Well, the obvious answer is: I can’t say. For a start, when TuSimple was a listed company, it traded in 2021’s market peaks at well over $60. By the time the company delisted, it was trading under $1. So Nvidia or no Nvidia, that’s not the kind of stock anyone wants in their portfolio.
Nonetheless, it is a good example that just because a titan on industry invests in something, doesn’t mean it’s a sure-fire winner long term.
But what is clear is that as Nvidia released the announcement, all of ARM, Recursion and SoundHound took a little boost to the stock price.
ARM traded 5.76% higher – and that was after the stock had nearly doubled after a strong earnings release.
Recursion traded up 13.8%.
But SoundHound… oh boy! SoundHound was up 66.74% after Nvidia’s announcement!
Funnily enough I wrote about ARM recently because of its importance to the development of a lot of the semiconductor industry we have today. And ARM and Nvidia do have a lengthy history too, with Nvidia attempting to buy ARM about four years ago for around a third of its current value now.
Recursion is an interesting drug-discovery company that no doubt is leveraging the power of Nvidia’s compute power to help model and discover new, novel approaches to developing drugs.
And SoundHound – well, it’s right in the midst of the generative AI hype train with AI speech and voice technology. So, of those three, SoundHound is definitely the “sexier” of the lot. That is probably why it rocketed higher than the rest.
Of these, they’re all varied, all doing something very different. However, for Nvidia at least, they are all worth having a stake in. As for you, well as I say… I can’t say. But they’re all worth looking at a little deeper, understanding the risks (after all you don’t want a TuSimple on your hands) and then figuring out if they make a fit with your portfolio, or not.
Ed note: One final thing too, last Thursday I hinted at a special broadcast I’d bee working on. And how you can find extra “alpha” on AI stocks in the market.
Well, that briefing is coming real soon, as in next week it’ll be going live (just putting some finishing polish on it all). But in order to see it and everything I’ve been working on – using AI to dig out the best AI stocks in the market, you will need to pre-register for it.
Thankfully my team has now given me the green light to share that pre-registration link. You just gotta mash the button below and it’ll take you where you need to go!
AI gone wild 🤪
How well and how fast are AI tools improving? To me, it seems like it’s every day.
Maybe that’s because I’ve been researching this area of technology for over a decade now. Or…
Maybe it’s because AI tools are literally improving at incredible speed, every, single, day.
I don’t say that flippantly. It’s a fact.
And it’s not so hard to prove either.
Granted, if I was to explain the difference in capabilities every single day, then you probably wouldn’t see a gigantic shift, you’d see it in increments.
But when you compare things today to, say, a year ago, that’s when you see how incredible things are getting.
So…
Let’s prove it. Let’s show you and blow your mind at the leap AI has made in terms of generative capabilities in less than one year.
On 1 April 2023, a video went viral of a text-to-video generative AI demonstration.
The prompt was “Will Smith eating spaghetti pasta.”
And, well, the result was… WEIRD.
That was generative AI text-to-video ten months ago.
Then last week, OpenAI, the creator of ChatGPT, unexpectedly released its text-to-video generative AI which it calls Sora.
And to put it bluntly, it’s unbelievably awesome.
The video below was created by Sora using the following prompt:
A stylish woman walks down a Tokyo street filled with warm glowing neon and animated city signage. She wears a black leather jacket, a long red dress, and black boots, and carries a black purse. She wears sunglasses and red lipstick. She walks confidently and casually. The street is damp and reflective, creating a mirror effect of the colourful lights. Many pedestrians walk about.
Impressive, isn’t it?
There’s loads more too.
The next one was created by Sora too, but with the prompt:
Drone view of waves crashing against the rugged cliffs along Big Sur’s garay point beach. The crashing blue waters create white-tipped waves, while the golden light of the setting sun illuminates the rocky shore. A small island with a lighthouse sits in the distance, and green shrubbery covers the cliff’s edge. The steep drop from the road down to the beach is a dramatic feat, with the cliff’s edges jutting out over the sea. This is a view that captures the raw beauty of the coast and the rugged landscape of the Pacific Coast Highway.
What I want you to pay particular attention to is the realness of the water and its movement.
Since the dawn of computer-generated images (CGI) in movies, creating water has been one of the biggest and hardest problems to crack. Decades of development, millions, maybe even billions, on trying to get it right, and Hollywood is pretty close to getting water only recently (see Avatar 2: The Way of Water as a good example of what can be done now).
But for all that effort, generative AI comes along and does it that good. It’s a very real and important turning point in terms of what AI is capable of and the fact it does really turn anyone into a potential filmmaker.
Now that’s not to say making films is that easy either. And this is by no means going to kill off Hollywood. But it will very likely redefine how films are made and what tools filmmakers use when unlocking their creative genius.
And maybe it does also give an as-yet-unknown creative genius the tools to become a filmmaker and create something wonderful.
If you think that’s how good things have got in less than a year, then what’s it going to be like at the end of 2024? Or just how much change will this usher in by the time the end of the decade rolls around?
This is why AI is so important and why appreciating the speed of change is so important too. We say this is a game-changing technology. That’s not hyperbole. As you can clearly see from the examples above, AI is already changing the game.
Boomers & Busters 💰
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
Boom 📈
Brainchip (ASX:BRN) up 38%
Veritone (NASDAQ:VERI) up 33%
BigBear.ai (NASDAQ:BBAI) up 19%
Bust 📉
iRobot (NASDAQ:IRBT) down 9%
Oddity Tech (NASDAQ:ODD) down 12%
Gorilla Technology (NASDAQ:GRRR) down 15%
From the hive mind 🧠
I bet all the brains trust at Google were really pumped about their huge new release of Gemini 1.5, the upgrade to their AI engine…until OpenAI dropped Sora and took all the attention!
It was only last week I was talking about the increased demand for memory as the AI takes hold. Well it looks like that was right on the button if SK Hynix is anything to go by!
Remember Apple, that company that makes consumer devices? You know the one that has almost single handedly released nothing to do with AI…yet. Well there are little signs that it’s not a huge theme lost on them. And I still expect in 2024 they may rock the AI boat a little harder.
Artificial Polltelligence 🗳️ the results show
Last Thursday we asked, would you be more interested in trading AI stocks or investing in AI stocks?
We define trading as (more or less) into and out of a stock in under a year. By investing, we mean in a stock for over a year and on average around three.
So, what was the voting outcome…
The winner is… investing!
Not the most suprising result, albeit I did expect investing to be higher, and conversely trading to be less…but perhaps that’s a reflection of the current state of the market and investors mindset… 🤔
A new poll will be with you on Thursday.
Weirdest AI image of the day
Famous character _____s own cigarette brand – r/Weirddallee
ChatGPT’s random quote of the day
"The great growling engine of change — technology." - Alvin Toffler, an American writer and futurist
Thanks for reading, and don’t forget to leave comments and questions below,
Sam Volkering
Editor-in-Chief
AI Collision
The AI generated videos are impressive. However, not quite spot on - the lady in the cityscape scenario is walking in a very studied way - almost slightly slow motion "catwalk" and, even less convincingly the pedestrians in the background all seem to be walking at exactly the same pace - and, again, slightly slowly for a modern, major metropolis.