Nvidia is spreading a few of its wealth by investing in a portfolio of different synthetic intelligence firms.
Nvidia (NASDAQ: NVDA) is certainly one of the world’s largest firms. Its market capitalization stands at $3.3 trillion as of this writing, with $3 trillion of that worth added in the final two years alone.
Nvidia’s graphics processing items (GPUs) for the knowledge middle are the gold commonplace for creating synthetic intelligence (AI) fashions, and they’re the foremost proponent behind the firm’s unbelievable development. Over the previous 12 months, CEO Jensen Huang has unfold a few of Nvidia’s success by investing in different AI shares.
Picture supply: Nvidia.
The six shares Nvidia at the moment owns
Nvidia began investing in (*6*) at the finish of 2023. In keeping with its newest 13-F submitting with the Securities and Alternate Fee, which was launched just a few weeks in the past, it now owns six of them:
- Utilized Digital Corp, which builds knowledge facilities for patrons.
- Arm Holdings, which helps semiconductor firms design superior computing chips.
- Nano-X Imaging, which develops AI software program to enhance the effectivity of medical imaging.
- Recursion Prescription drugs, which is utilizing AI to remodel the drug discovery course of.
- Serve Robotics, which develops autonomous supply robots.
- SoundHound AI (SOUN -3.87%), which is a frontrunner in conversational AI applied sciences.
Arm Holdings acquired the largest funding, with Nvidia’s place price $280 million at the finish of the third quarter of 2024 (ended Sept. 30). That represents over half of the worth of Nvidia’s total portfolio.
Arm inventory is up round 77% since Nvidia purchased it, but that does not maintain a candle to the 271% return generated by SoundHound AI. Nvidia’s place in SoundHound is comparatively small, with a worth of simply $13.6 million based mostly on its present inventory worth of $7.88, but that clearly hasn’t stopped buyers from speeding to purchase it.
So, is it too late to comply with Nvidia’s lead?
A frontrunner in conversational AI
Most common generative AI chatbot functions carry out greatest when customers enter text-based prompts, but SoundHound is a frontrunner in conversational AI, which may perceive voice prompts and reply in variety.
SoundHound’s software program is primarily utilized in the automotive, hospitality, and quick-service restaurant industries. Nevertheless, it acquired Amelia just a few months in the past, which is one other firm specializing in conversational AI. It helps organizations create AI-powered digital brokers to serve their clients and workers, and the deal helps SoundHound increase into different industries like monetary companies, insurance coverage, healthcare, and extra.
Automotive giants like Mercedes-Benz and Stellantis (house to Jeep, Dodge, and Chrysler) are two prime clients of SoundHound’s software program. Its Chat AI product permits these manufacturers to put in an AI voice assistant of their automobiles, so drivers can immediately request data on the climate, the inventory market, and even the standing of their flight on the option to the airport.
Drivers may also say goodbye to bodily instruction manuals as a result of SoundHound’s Car Intelligence software program is aware of all the things about the options and features of their automobile, and so they can request it at any second.
In the restaurant business, common chains like Chipotle, Krispy Kreme, and Papa John’s use SoundHound’s software program. The corporate gives an AI ordering system that can be utilized to just accept cellphone orders, in-store orders, and even drive-thru orders with out human intervention. It additionally developed a product known as Worker Help, which staff can name upon at any time in the event that they want details about retailer insurance policies or menu gadgets.
SoundHound’s income is hovering
SoundHound generated a document $25.1 million in revenue throughout the third quarter of 2024, which was a whopping 89% enhance from the year-ago interval. SoundHound included a few of Amelia’s income for the first time, which helped drive that development.
The acquisition added different advantages like buyer diversification; 90% of SoundHound’s income got here from the automotive business in the third quarter of final 12 months, whereas it now has six completely different industries accounting for between 5% and 25% of its whole income. That is certainly one of the foremost causes SoundHound simply considerably elevated its steering for 2024 and 2025.
It now expects to ship between $82 million and $85 million this 12 months (in comparison with its earlier forecast of $80 million), which might be an 82% enhance in comparison with 2023 at the midpoint of the vary.
The corporate then expects to generate between $155 million and $175 million in income in 2025 (in comparison with its earlier forecast of $150 million), which factors to accelerated development of 97% at the midpoint of the vary.
But it surely will get higher. SoundHound informed buyers it has an order backlog of greater than $1 billion, which it expects to transform into income over the subsequent six years.
Is it too late to comply with Nvidia into SoundHound inventory?
SoundHound is shedding fairly a bit of cash. It burned via $21.7 million on a usually accepted accounting rules (GAAP) foundation throughout the third quarter (keep in mind, that was on simply $25.1 million in income). The corporate solely has $136 million in money available, so it will probably’t afford to lose cash at this tempo for very lengthy.
In reality, SoundHound not too long ago introduced a brand new at-the-market fairness facility that can enable it to lift an extra $120 million by issuing extra inventory. It is going to assist safe the firm’s future, but it would additionally dilute present shareholders, which might translate into losses for buyers who purchase the inventory at present.
Primarily based on SoundHound’s trailing-12-month income and its present market capitalization of $3.2 billion, its inventory trades at a price-to-sales (P/S) ratio of 37.5. That makes it much more costly than Nvidia! That does not make a complete lot of sense, contemplating that Nvidia has a decades-long monitor document of success, plus a fortress balance sheet, surging monetary outcomes, and the greatest AI chips in the world:
SOUN PS Ratio knowledge by YCharts
SoundHound’s income forecast for 2025 makes the inventory seem less expensive on a ahead foundation. Nevertheless, it is nonetheless a really speculative option to spend money on the AI business, so it is vital to solely put in cash you possibly can afford to lose.
In spite of everything, Nvidia is a $3.3 trillion company, so it in all probability is not involved about shedding the $13.6 million it at the moment has invested in SoundHound inventory if issues do not work out.