Nvidia (Nasdaq: NVDA) At the beginning of 2023, the company’s market capitalization was $360 billion.The company has since increased in value by $1.8 trillion and is now the third largest company in the world, behind the United States apple and Microsoft.
Strong interest in artificial intelligence (AI) is a key driver of this value creation. Nvidia makes the industry’s most powerful graphics processing units (GPUs) for data centers, which developers use to build, train and deploy their AI models. These chips will more than triple Nvidia’s data center revenue in fiscal 2024 (ending January 28), and that momentum appears to continue in fiscal 2025.
Nvidia is now using some of its newfound wealth to invest in other artificial intelligence companies, which may hint at the direction of the next wave of artificial intelligence value creation.
Nvidia bought 5 artificial intelligence stocks at the end of 2023
Nvidia filed its first-ever 13-F report with the SEC on February 14 and publicly disclosed new holdings in five different stocks:
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Sound Hound Artificial Intelligence (NASDAQ: SOUN)developing speech recognition and conversational artificial intelligence technology.
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Arm HoldingsDesigning processors for the world’s largest chip company, this is Nvidia’s largest investment, worth $147 million as of the end of 2023.
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Nano-X Imaging, a company that is improving patient outcomes by using artificial intelligence to enhance medical images. The stock is Nvidia’s smallest investment, worth less than $400,000 as of the end of 2023.
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Return Pharmaceuticala company that is using artificial intelligence to aid drug discovery.
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TuSimple Holdingsa company developing an autonomous driving platform for the trucking industry.
SoundHound AI stock is the best performer so far, up 142% in 2024. It values its Nvidia stake at about $8.7 million, which doesn’t sound like much, but SoundHound is only a $1.5 billion company.
So should investors follow Nvidia’s lead and become experts in conversational artificial intelligence?
SoundHound has a growing portfolio of artificial intelligence products
most of us are familiar with AI. Chatbots such as ChatGPT, Gemini and Claude. They were originally designed to receive text-based prompts and be able to generate text content, images, videos, and computer code on command. SoundHound focuses on conversational AI and is designed to recognize voice-based prompts and physical responses.
This opens up a range of possibilities, especially in use cases that require hands-free functionality. For example, a restaurant chain uses SoundHound’s employee assistive technology to help employees quickly answer questions in high-pressure situations, such as when they might be serving customers or completing operational tasks.
Likewise, SoundHound’s technology is also popular with car manufacturers, e.g. Mercedes Benz and Strantis, which uses it to power their in-car virtual assistant. This means drivers can instantly retrieve information about the vehicle’s features, in addition to weather forecasts, sports results and information about local restaurants (to name just a few features).
SoundHound recently announced a partnership with NvidiaDrive platform, which will allow automakers to deliver artificial intelligence at the edge. This means drivers don’t need an internet connection to use their voice assistant, making it available in more places and enhancing data privacy.
The Drive platform is Nvidia’s end-to-end solution for automakers looking to install autonomous driving capabilities into their new vehicles. Considering that Drive already serves many countries and regions around the world, Drive may become a key distribution channel for SoundHound technology in the long term. Leading automotive brands.
SoundHound has meager revenue and huge losses
SoundHound generated revenue of $45.8 million in 2023, an increase of 47% compared to 2022. The company is still in the scaling phase, although it did have a backlog of $661 million last year, double what it will be in 2022. End of 2022.
Management forecasts revenue of approximately US$70 million in 2024, with an accelerated growth rate of 54%.
That’s good news, but SoundHound’s bottom line is worth keeping an eye on in the short term, as the company lost $91.7 million last year. While it’s normal for small technology companies to lose money during their growth stages, SoundHound has just $95.2 million in cash and equivalents. balance sheet, so it can’t afford another year like 2024.
Risk-averse investors shouldn’t follow Nvidia’s lead and buy SoundHound stock
The financials above make SoundHound stock a risky investment relative to other AI stocks like Nvidia or Microsoft. The company will likely need an infusion of cash over the next year or two to continue operating, which would create uncertainty.
Along with that, Nvidia’s investment in SoundHound stock is a huge vote of confidence that could spawn more unique deals, such as that for its Drive platform. Additionally, SoundHound’s order backlog could lead to accelerated revenue growth in the coming years.
But keep this in mind: Nvidia’s stake in SoundHound is worth just $8.7 million. If it hits zero, it would have little impact on the $2.2 trillion chip giant. That’s the equivalent of a loss of $0.39 — yes, 39 cents — for someone with a net worth of $100,000.
Not only do the average investor have fewer resources than Nvidia, but their risk appetite is also likely to be very different, so buying SoundHound stock should be left to those willing to tolerate volatility and potential losses.
Should you invest $1,000 in SoundHound AI right now?
Before buying shares of SoundHound AI, consider the following factors:
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Anthony DiPizio The Motley Fool owns and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends Stellantis and recommends the following options: Buy January 2026 $395 calls and sell January 2026 $405 calls on Microsoft.The Motley Fool has a has a disclosure policy.
Nvidia Just Bought 5 Artificial Intelligence (AI) Stocks, One of which Has Gone 142% Originally published by The Motley Fool
