Nvidia just bought five artificial intelligence (AI) stocks, but this one is rising the most

By | March 4, 2024

Nvidia (NASDAQ: NVDA) is the world’s largest semiconductor company, and having just surpassed a $2 trillion valuation, it’s also one of America’s most valuable companies overall as measured by market capitalization. Only Microsoft And Apple are more valuable.

Most of Nvidia’s market capitalization has been added in the last twelve months alone, thanks entirely to its data center chips designed to handle artificial intelligence (AI) workloads. CEO Jensen Huang is often called the “Godfather of AI” by Wall Street analysts, and now he’s spreading his company’s fortunes by investing in other AI stocks.

nvidia headquarters with nvidia board in front.

Image source: Getty Images.

The five AI stocks in which Nvidia owns shares

In its first-ever 13-F filing with the Securities and Exchange Commission on February 14, Nvidia revealed that it had purchased five AI stocks in the fourth quarter of 2023 (ended December 31):

  1. Arm positionswhich helps the world’s largest semiconductor companies design and develop their advanced computer chips.

  2. Nano-X imagingthat uses AI to improve the efficiency of medical imaging and help patients achieve better outcomes.

  3. Recursion pharmaceutical productsthat uses AI to reimagine drug discovery.

  4. Tusimple Holdingswhich develops advanced autonomous self-driving technologies for the trucking industry.

  5. SoundHound AI (NASDAQ: SOUND)that develops speech recognition and conversational AI technologies.

Arm Holdings attracted the largest investment, with Nvidia holding a position worth more than $147.3 million at the end of last year. However, Arm is only second best in the group of five stocks when it comes to stock price performance through 2024, with a 104% gain year to date.

SoundHound AI wins that race. The stock price is up a whopping 180% this year, valuing the company at $1.5 billion. Nvidia’s stake is relatively small at just $10.1 million at SoundHound’s current share price ($5.83), but this hasn’t stopped the buying frenzy among investors. So is it too late to follow Nvidia’s example?

Conversational AI is a game changer for businesses

While many popular generative AI applications focus on recording text prompts to create text, image and video content, SoundHound has developed conversational AI that understands voice and responds in kind.

SoundHound’s customer list includes some of the largest companies in the hospitality and automotive industries. Restaurant chains use conversational AI to take customer orders – both in-store and in the drive-thru – and also handle incoming telephone queries, reducing the workload for employees. Krispy Kreme and Jersey Mike’s are just two of the many SoundHound customers in that space.

Auto giants love Mercedes Benz And Stellantis (home of Chrysler, Jeep, Dodge and other brands) use SoundHound’s technology to create in-car virtual assistants that can understand each vehicle’s functionality and answer a wide range of common questions.

In early February, SoundHound took these products to the next level with its ‘Dynamic Interaction With Genative AI’ technology. It’s a brand new interface that responds to spoken and touch cues with audiovisual content, instead of just voice. It can decide when it is appropriate to include maps, internet search results, images and videos in its responses to improve the user experience.

SoundHound AI experienced a strong increase in demand in 2023

SoundHound generated just $45.9 million in revenue in 2023, although this was an impressive 47% increase compared to 2022.

The real story is the company’s backlog, which stood at $661 million at the end of the year. That was double the backlog it had at the same time in 2022. Although SoundHound’s revenue is still relatively low, that gap could translate into substantial growth in the coming years.

There are signs of this in SoundHound’s forecast for 2024. It expects to reach $70 million in revenue this year, which would accelerate growth to 49%.

Unfortunately, there is one negative factor that investors should be wary of. SoundHound ended up losing $88.9 million in 2023, and while it’s not unusual for small tech companies to lose money as they scale, this company only has $99.5 million in cash on hand, so it can’t afford a repeat of this loss. last year.

SoundHound will most likely need a cash infusion in the coming years. If it completes a stock offering, it will dilute existing investors and potentially hurt its share price.

Is it too late to follow Nvidia in the SoundHound AI stock?

SoundHound AI shares soared more than 60% on Feb. 15, when investors first learned of Nvidia’s investment in the company. It rose another 46% on February 26, when Nvidia announced an expansion of its partnership with Service now to improve the telecommunications industry using generative AI.

Together, Nvidia and ServiceNow will build generative AI solutions to improve customer service and service assurance. While this deal doesn’t mention SoundHound, conversational AI is the perfect technology to help service providers automate phone calls and resolve customer queries much more efficiently.

Given Nvidia’s recent investment in SoundHound stock, investors are speculating that this deal could benefit the conversational AI specialist down the road. Additionally, in the fourth quarter of last year, SoundHound said it received a “notable, unique revenue contribution from a leading AI chip company.” No details are given, but the timing certainly lines up nicely with Nvidia’s investment in SoundHound.

For now, SoundHound AI stock may simply be a speculative bet on the AI ​​industry until it is in a more predictable financial position. There’s nothing wrong with that, as long as investors understand that it will likely come with more volatility than the average stock.

Should you invest $1,000 in SoundHound AI now?

Consider the following before purchasing shares in SoundHound AI:

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Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Apple, Microsoft, Nvidia and ServiceNow. The Motley Fool recommends Stellantis and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has a disclosure policy.

Nvidia Just Bought 5 Artificial Intelligence (AI) Stocks, But This One Is Rising the Most Originally published by The Motley Fool

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