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Nvidia’s Stake in Smaller AI Firms Sparks Rally in Shares, Unveiling Growth Strategy

Silicon Valley, February 15, 2024, The Europe Today: Nvidia, the world’s leading artificial intelligence (AI) chipmaker, triggered a surge in the shares of smaller AI firms on Thursday after disclosing substantial stakes in them. The move sheds light on Nvidia’s strategic approach to growth in the AI sector, underlining its expanding influence as the third most valuable U.S. company.

Nvidia’s largest disclosed investment, totaling $147.3 million, was directed towards Arm Holdings, a chip designer. Notably, Nvidia had previously attempted to acquire Arm in an $80 billion deal two years ago, but the transaction faced antitrust challenges, leading to its abandonment. Despite Nvidia’s stake, shares of Arm experienced a marginal dip of nearly 0.5% on Thursday, following an impressive 60% surge over the last week driven by robust forecasts.

The disclosure of Nvidia’s stakes, detailed in a 13F filing as of December 31, signifies the company’s diversified investments across various domains. One notable investment is in Recursion Pharmaceuticals, a biotech firm, where Nvidia invested close to $76 million. Recursion Pharmaceuticals witnessed a 5% gain in its shares, reflecting the positive impact of Nvidia’s financial backing aimed at accelerating AI model training for drug discovery.

Conversational voice assistants developer SoundHound AI also benefitted from Nvidia’s investment of nearly $3.7 million, experiencing a significant 50% surge in its shares, reaching $3.33. Another noteworthy investment by Nvidia was in Israel-based medical device company Nano-X Imaging, utilizing AI software for report analysis, resulting in a remarkable 52% increase in Nano-X Imaging shares.

Autonomous driving technology company TuSimple Holdings, which recently delisted from the Nasdaq, secured $3 million in capital from Nvidia. The investments across these diverse firms showcase Nvidia’s portfolio approach, indicating potential winners and losers in its strategic vision.

Rick Meckler, Partner at Cherry Lane Investments, emphasized the positive impact of Nvidia’s investment, stating that it is perceived as a strong positive by investors and can aid companies in need of capital. The broader market response demonstrated retail traders’ engagement, with SoundHound and Nano-X Imaging being among the top five most actively traded stocks by individual investors, according to J.P. Morgan data.

Shares of other micro-cap AI firms exhibited parallel upward movements, with Guardforce AI gaining 11% and Holdings registering a 10.3% increase. The diverse investments by Nvidia, along with backing from prominent funds like Rokos Capital Management and Bridgewater Associates, indicate a comprehensive strategy as Nvidia continues to solidify its presence in the dynamic AI landscape.