In the early days of AI, Nvidia (NASDAQ: NVDA) was the clear winner. Several AI stock investments were disclosed in a regulatory filing last month, attracting investors. On Feb. 14, Nvidia submitted its first 13F with the SEC after the value of these interests hit $100 million for the quarter ending
Given Nvidia's AI performance, investors are likely to be interested in its AI portfolio equities. The five stocks that made the cut and the one that received most of Nvidia's investment are listed below. A diverse team at Nano-X Imaging created a cost-effective X-ray system that uses AI to improve diagnosis accuracy. This is Nvidia's smallest investment, worth $553,000.
TuSimple Holdings' self-driving semitruck for freight has been delisted and privatized. At approximately $1.7 million, this is Nvidia's second-smallest holding. SoundHound AI creates vehicle and restaurant conversational and voice recognition AI solutions. About $10 million is the stake's value. AI aids medication discovery at biotech Recursion Pharmaceuticals. Around $81 million, this is Nvidia's second-largest holding.
Meet the biggest and best The last stock in the portfolio shouldn't surprise Nvidia investors. The stock is Arm Holdings (NASDAQ: ARM). Nvidia's investment in Arm Holdings is worth $253 million, 2.5 times its other holdings. Nvidia's trust in Arm's future is shown here.
In late 2020, Nvidia publicly sought $40 billion to acquire Arm Holdings, but authorities rejected the deal in early 2022. After the transaction failed, Arm Holdings went public in September 2023. Arm stated that Nvidia had "expressed interest" in buying shares before the IPO.
Why was Arm interesting to Nvidia? Mostly the company's tech and AI roots. Most smartphones, tablets, smart TVs, and PCs use Arm's processing architectures.
Its chip blueprints are vital to hyperscale computing, cloud computing, and data centers, where most AI computation occurs. CPUs made by Arm are essential to AI systems. Nvidia's Grace Blackwell GB200 Superchip has 36 Grace CPUs with 72 Arm v9 cores each. A lot of number-crunching power in one box. The v9 has twice the royalty rate and more computing power than its predecessor, according to Arm CEO Rene Haas.
An AI powerhouse That adds up quickly for Arm, as home math enthusiasts can see. Arm reported record revenue of $824 million in its fiscal 2024 third quarter, up 14% year over year, and adjusted EPS of $0.29, up 32%. That just partially explains it. Arm's remaining performance obligation (RPO), which includes unrecognized contractual revenue, is a promising sign. RPO rose 38% to $2.43 billion in the third quarter.
Companies expect their growth spurts to continue. Arm expects fourth-quarter revenue of $850 million to $900 million, up 34% to 42% from the third quarter's 14%.
Valuation requires context. Arm trades at 1,700 times earnings and 45 times revenue. This appears insanely expensive, but Arm's expected growth rate is ignored. Arm's forward price/earnings-to-growth (PEG) ratio is below 1, indicating a cheap stock. With the discrepancy, some investors may be put off by the inflated valuation.
This indicator shows Arm Holdings' AI gold rush is just beginning. Nvidia knew this from its extensive commercial contacts, therefore Arm was a natural candidate for its acquisition effort and largest stock-based investment.
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