Nvidia Bought 6 Artificial Intelligence (AI) Stocks, but This 1 Has Soared the Most

Core Insights - Nvidia is investing in a portfolio of artificial intelligence companies, leveraging its significant market capitalization of $3.3 trillion, which has increased by $3 trillion in the last two years [1][2]. Investment Portfolio - Nvidia began investing in AI stocks at the end of 2023 and currently owns six companies, including Applied Digital Corp, Arm Holdings, Nano-X Imaging, Recursion Pharmaceuticals, Serve Robotics, and SoundHound AI [3]. - The largest investment is in Arm Holdings, valued at $280 million, representing over half of Nvidia's entire portfolio [4]. Performance of Investments - Arm stock has increased by approximately 77% since Nvidia's investment, while SoundHound AI has generated a remarkable 271% return, despite Nvidia's position in SoundHound being valued at only $13.6 million [5]. SoundHound AI Overview - SoundHound is a leader in conversational AI, primarily used in the automotive, hospitality, and quick-service restaurant industries [6][7]. - Major clients include automotive giants like Mercedes-Benz and Stellantis, utilizing SoundHound's AI voice assistant technology [8]. Financial Performance of SoundHound - SoundHound reported a record revenue of $25.1 million in Q3 2024, an 89% increase year-over-year, partly due to the acquisition of Amelia [11]. - The company has diversified its revenue sources, with six different industries contributing to its income, leading to an increased revenue guidance for 2024 and 2025 [12][13]. Future Outlook - SoundHound expects to generate between $82 million and $85 million in 2024, an 82% increase from 2023, and between $155 million and $175 million in 2025, indicating a 97% growth at the midpoint [13]. - The company has an order backlog exceeding $1 billion, which it anticipates converting into revenue over the next six years [14]. Financial Challenges - Despite revenue growth, SoundHound is currently unprofitable, with a GAAP loss of $21.7 million in Q3 2024, and only $136 million in cash reserves [15]. - To secure its future, SoundHound announced a new equity facility to raise an additional $120 million, which may dilute existing shareholders [16]. Valuation Metrics - SoundHound's stock trades at a price-to-sales (P/S) ratio of 37.5, higher than Nvidia's P/S ratio of 29.94, raising questions about its valuation compared to Nvidia's established track record [17][18].