Chipmaker and AI experts have sold several companies in their portfolio. Should investors follow the lawsuit?
Progress in the field of artificial intelligence (AI) over the past few years has been fast and furious. Undoubtedly, one of the biggest beneficiaries of this trend is nvidia (NVDA) -1.06%)). The company’s graphics processing units (GPUs) support much of the advancement in this sector, making it the gold standard for AI. This has driven NVIDIA’s unprecedented sales and profit growth, and all movements the company has made have been analysed by investors for insight into the future of the AI revolution.
Later last week, NVIDIA filed a 13th Fed report with the Securities and Exchange Commission (SEC). This details changes to the investment portfolio in the most recent quarter. In this case, the quarter ended on December 31st.
Nvidia made some important changes, selling out of three AI stocks, trimming one position and adding stocks to the other two. The company has fingers in the pulsation of AI, so that decision seems to have a lot of weight with investors.
Let’s take a look at the stock in question and see what insights can be gathered from Nvidia’s moves.
Image source: Getty Images.
Three notable sales
Nvidia sold perfectly from its position in Soundhound AI (soun -0.26%)). The company is one of the leading providers of voice-enabled AI solutions for smart TVs, cars, the Internet of Things (IoT), and customer service spaces. Its generative AI solutions are expanding into a variety of industries and driving its growth. Nvidia has sold approximately 1.7 million shares worth more than $34 million.
In the third quarter, Soundhound AI’s record $25 million revenue rose 89% year-on-year, with a loss per share of $0.06, improving from a loss of $0.09 in the previous year’s quarter. These results are impressive, but Soundhound AI stock has been garnering around 836% annually since Nvidia first reported its shares.
As a result, the increase in valuations was equally eye-catching, closing off the year when stocks sold 90x sales.
Nvidia also dumped its entire stock in Serve Robotics (serve) 9.64%))itself describes it as a “major autonomous sidewalk delivery company” focusing on last mile delivery. Serve Robots have a fleet of delivery robots, and have partnered with some of the largest food delivery companies in the market, but their growth has been extremely lumpy. Nvidia has sold approximately 3.7 million shares worth $50 million.
In the third quarter, Robotics revenue was $0.22 million, an increase of 254% year-on-year, but slowed from $51 million in the second quarter. Additionally, the company’s losses increased to $7.9 million. Nvidia’s profits caused a stock run, earning 592% between June 30th and December 31st. This led to an increase in valuation in return as the stock was sold at 279 times the sales, but no profitability was seen.
Chipmakers also dumped the entire shares of NanoX Imaging (nnox) 0.31%))a company that uses AI in conjunction with real-world medical imaging applications to provide advanced diagnostic capabilities and improve patient care. This is the smallest shares of Nvidia, selling all 60,000 shares worth around $429,000.
In the third quarter, Nano-X earned $3 million in revenue, up 22% year-on-year, but Nano-X lost $0.23 per share, compared to a loss of $0.37 in the quarter year-on-year It has been improved. Additionally, the company’s cash position has dropped from $82 million to $57 million as it continues to burn its reserves.
Nano-X’s shares ended the year when they sold at 39x sales. This is the price that financial advances cost to pay slippery businesses at best.
One cropped position
Nvidia also significantly reduced its interest in ARM Holdings (arm -2.13%))It has been its largest holding for a long time. The company offers designs used in many of the world’s most advanced semiconductors, generating royalties and licensing fees along the way. Nvidia has sold approximately 860,000 shares worth around $106 million. To be fair, Nvidia’s biggest stock is much larger, as there are still more than 1.1 million shares worth nearly $176 million (as of the market closing Friday).
In the third quarter, ARM rose 19% year-on-year to a record-breaking $983 million, driven by record-breaking royalty revenues and strong licensing. This tripled earnings per share (EPS) at $0.24. Helping drive the results was the company’s AI-centric Version 9 core, which increased computing power and generated double the royalty rates of its predecessor.
The arm is growing profitably, but the stock still has a high valuation, selling at 209 times and 46 times the revenue (at this time of writing).
Two notable additions
The first of Nvidia’s new holdings is Nebius Group (NBIS) -6.47%)). Formerly known as Yandex Group, the company provided internet and search services in Russia. Stock trading was suspended in February 2022 after the Ukraine invasion. The company sold control of a Russian company and moved it to the Netherlands.
Nebius is pivoting and currently offers cloud and AI services to its global customer base. The shares began trading on October 20th, and soon after, Nvidia purchased around 1.2 million shares worth around $33 million at the time of purchase.
It is also worth noting that Nvidia is part of a $700 million private property. He said this will be used for additional capabilities to support training and execution of AI models. The company previously announced plans to invest more than $1 billion in European AI-centric infrastructure.
Considering the situation, the comparison is relatively meaningless. That said, revenues of $43.3 million increased by 766%, and the adjusted loss of $47 million improved by 45%, albeit from a small base. At the time of Nvidia’s investment, the stock was on sale with less than one-fold sales, which usually suggests an undervalued stock.
Other new positions for Nvidia will be in the future (WRD) -15.79%)). China’s Robotaxi and the autonomous driving company were released in late October shortly after they announced a strategic partnership with Uber and integrated Robotaxis into Uber’s platform. Shortly after the IPO, Weride began deploying a fleet of Robotaxis on the Uber app in the United Arab Emirates.
In the third quarter, Weride fell 6% to generate $10 million, while loss per share improved by 31% at $2.10. There is little to continue as the official operating history is limited. Assigning ratings will be difficult. However, Nvidia must have liked what she saw as she bought over 1.7 million shares on nearly $25 million in stock at the time of its purchase.
What does that mean?
The general thread behind all Nvidia sales is a relatively stretched rating. The company appears to have simply been responding to what is likely to be considered a lofty multiple and is obsessed with getting a little profit. It is also possible that Nvidia reviewed the relative financial and operational performance of its investments and concluded that they simply did not meet their potential.
In hindsight, Nvidia didn’t know that Wall Street wasn’t, but it is likely that she simply responded to what she perceived as a more persuasive opportunity.
