Nvidia has a reputation for identifying high-quality companies in their initial stages and betting on their success. Last year, the company participated in more funding rounds than any other company in the US, behind only Alphabet. In the past, it has invested in startups like OpenAI, Perplexity, and Mistral, so when the chipmaker puts its money in some company, people are bound to notice.
A similar occurrence happened when the firm filed its recent 13F report. There were some clear omissions and needless to say, the stock prices of those companies tanked as the market digested the news of divestment. For those still on the list, the stock price reacted positively.
As the Santa Clara-based chipmaker proceeds with these investments, there is also the threat of regulators increasing the scrutiny based on anti-competitive practices. The firm is already facing the threat of anti-competitive charges in France and at home, and the recent acquisition of Run:ai continues to be under scrutiny. It must be said, however, that these challenges do not necessarily have any negative impact on the companies that made it to the 13F.
We decided to take a look at the stocks still on the 13F filing and find out what’s attracting the chipmaker to these companies. Do they have a moat? Are they still worth buying for the average investor? Or have the stocks already rallied too much?
5. WeRide Inc. (NASDAQ:WRD)
WeRide Inc. (NASDAQ:WRD) operates as a holding company serving the logistics, sanitation, and mobility industry. It mainly provides products and services related to autonomous driving for categories like robotaxi, robovan, robosweeper, and robobus. It also offers an app by the name WeRide Go app which serves as a ride-hailing platform. The company’s stock doubled in value after the announcement. The Santa Clara-based chipmaker’s holding in the company is worth $24.6 million according to the corporate filing.
With this move, the chipmaker has also shifted its focus to overseas firms as WeRide is a Chinese company. If Jensen Huang’s judgment of the company’s potential is correct, WeRide could be set for double-digit growth for multiple years to come. The Robotaxi market is just getting started and WeRide is well-positioned to create a strong foothold in the Chinese Robotaxi market.
The announcement also opens up the company to a better relationship with the US companies involved in autonomous driving. It remains to be seen what advantages the company can take from this relationship but the potential is massive.
4. Nebius Group N.V. (NASDAQ:NBIS)
Nebius Group N.V. (NASDAQ:NBIS) is an infrastructure player in the AI industry. It offers a cloud platform for AI workloads and builds large GPU clusters and cloud platforms for customers. When the quarterly corporate filing came out, the stock gained 12%.
This isn’t a significant bump in price, but that is partly because the market was already aware of the exciting opportunity that Nebius presents. Back in December, Citron Research called the company’s CEO ‘the real deal’. They believe the stock could become a Wall Street favorite:
A sleeper with no analyst coverage yet, the market hasn’t caught on to its massive potential
Last month, Hedgeye also initiated the stock as a new long idea. Analyst Felix Wang pointed out the fact that the company had no debt with about $2.2 billion in cash. The company could be profitable by early next year and could become a popular AI stock well before that inflection point.
3. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a biotech company that combines multiple areas like medicine, engineering, data science, and automation. The purpose of these efforts is to revolutionize and industrialize the process of drug discovery. With the backing of Jensen Huang and co, one can assume there is something special about this company and that its efforts have a higher chance of success compared to others doing similar innovations.
The company’s pipeline of drugs includes RC-617, a treatment for advanced solid tumors. The solid tumor market is expected to grow to $375 billion by 2034 and with the positive phase 1 results, RXRX is set to penetrate that market soon. The phase 2 data for REC-994, a treatment for Cerebral Cavernous Malformation, is also set to be released soon.
The risk of the next phases of these innovative medical treatments may not necessarily be positive, but it is the management and the tradition of innovation that provides the value here and investors should see the bigger picture rather than test phase data.
2. Applied Digital Corporation (NASDAQ:APLD)
Applied Digital Corporation (NASDAQ:APLD) operates various infrastructure solutions related to AI and data centers in North America. The company operates through the following segments: Data Center Hosting Business, HPC Hosting Business, and Cloud Services Business. The company’s stock jumped 8% after the 13F filing came out and has been slowly inching further up since.
Applied Digital recently reported its fiscal second-quarter earnings and investors weren’t impressed by the widening losses and the debt conversion, even though it comfortably beat estimates. As investors digested the share dilution, the share price was struck another blow on DeepSeek AI Monday. Since then, it has slowly been moving higher.
The company is transitioning from operating data centers for crypto mining to serving hyperscalers. This is a massive growth opportunity. One company is close to signing the deal for a 100MW lease while another 300MW of capacity is likely to be taken up soon. This transition has kept the stock price depressed but that may not be the case for long now.
1. Arm Holdings plc (NASDAQ:ARM)
Arm Holdings plc (NASDAQ:ARM) is known for its CPU and semiconductor-related technologies which it licenses to other major semiconductor players in the industry. The company’s products are used in everyday devices like smartphones and laptops. Even though the biggest semiconductor company in the world has trimmed down its position in the stock, it continues to have a significant holding worth $135 million, the highest investment in a company according to the recent filing.
ARM is an integral part of the current AI ecosystem and should remain so in the future as well. The company’s business model allows it to earn recurring revenue through licensing deals. With it being an integral part of the ecosystem, these royalties and licensing deals aren’t going away anytime soon.
This also begs the question of whether the current valuation is justified. At over 100 times future earnings, the stock is overvalued. However, it could stay permanently overvalued due to the nature of its business. Investors focusing on quality stocks will have no problem buying the stock at these valuations, as these are likely to stay.
Arm Holdings plc (NASDAQ:ARM) is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held ARM at the end of the third quarter which was 38 in the previous quarter. While we acknowledge the potential of ARM as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as ARM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
