Exploring Nvidia’s Strategic Investments in AI: A Game-Changer for the Future
Nvidia (NASDAQ: NVDA) is riding a wave of unprecedented demand for its graphics processing units (GPUs). These powerhouse chips fuel sectors like gaming, data centers, automotive technology, and research in artificial intelligence (AI). With revenues soaring, Nvidia isn’t just sitting on its wealth; it’s making strategic investments that promise to broaden the reach of its products and technologies.
In its recent third-quarter 13F filing, Nvidia disclosed that it still holds 1.7 million shares of SoundHound AI (NASDAQ: SOUN), a frontrunner in voice assistance tech. Additionally, it revealed a new stake in Applied Digital (NASDAQ: APLD), a rapidly emerging designer and builder of AI-powered data centers. The value of Nvidia’s investment in SoundHound stands at about $8 million, while its engagement with Applied Digital amounts to a robust $63 million.
Why Keep an Eye on These Opportunities
SoundHound AI, currently valued at approximately $2.3 billion, has experienced significant volatility but has seen its stock price nearly triple over the past year. The company is thriving, with a year-over-year revenue growth of 89% in Q3. Part of this surge can be traced to the acquisition of Amelia, which has expanded SoundHound’s reach into markets beyond automotive and restaurant sectors.
This year, SoundHound and Nvidia joined forces to integrate voice AI into Nvidia’s groundbreaking DRIVE platform. The partnership is especially noteworthy in the electric vehicle space, where Stellantis is utilizing SoundHound’s technology across seven of its car brands. Excitement is building as SoundHound aims to branch out into finance, healthcare, and retail—fields ripe for innovation.
However, while revenue is booming, investors are eager for proof of sustainable growth. Though SoundHound reported an adjusted net loss of $15 million in Q3 (mirroring its Q2 results), management is optimistic about achieving profitability on an adjusted EBITDA basis by the end of 2025.
SoundHound’s Potential: If the company can showcase consistent adoption and transition to profitability, it stands to deliver substantial returns for its investors in the years to come.
Applied Digital: Fueling the Data Center Boom
Meanwhile, Applied Digital, with a market cap of $1.8 billion, is also making waves in the market, boasting a remarkable 112% increase in stock value over the past year. This company specializes in building data centers optimized for AI and cloud services, along with cryptocurrency mining. Its latest report highlighted a 67% revenue growth year-over-year, fueled by inquiries from significant customers planning for 2025 and 2026.
Yet, like many growing firms, Applied Digital faces its own hurdles. The company recorded an adjusted net loss of $4 million last quarter, underscoring its relatively limited resources. Nvidia’s investment here becomes crucial, bolstering the company’s finances and enabling the pursuit of high-return projects that promise more growth.
Setting Sights on the Future: Recently, Applied Digital announced plans for a state-of-the-art, 369,000-square-foot facility tailored for AI workloads, indicating its intent to become a leader in managing high-performance data centers. The cloud service sector also showed promise, generating nearly half of its revenue last quarter and presenting myriad growth opportunities.
With a reported adjusted EBITDA profit of $20 million in its latest quarter, Applied Digital’s stock trades at an enterprise value-to-EBITDA ratio of 21 based on this year’s consensus estimates. This valuation appears appropriate for a technology firm in a rapid growth phase. If it continues to enhance profitability, the stock could yield excellent returns moving forward.
The Road Ahead
For those who feel they may have missed out on investing in promising stocks, now could be an opportune moment. Companies like Nvidia have consistently shown immense returns over the years. For instance, a $1,000 investment in Nvidia made back in 2009 would have blossomed into an incredible $378,269 by now.
As we look at Nvidia’s investments in SoundHound AI and Applied Digital, it becomes clear that these smaller companies could potentially offer high returns for investors who align with them early.
In conclusion, as Nvidia leverages its financial muscle to support the growth of these businesses, watch for exciting developments that could reshape industries and yield significant returns for savvy investors.
The AI Buzz Hub team is excited to see where these breakthroughs take us. Want to stay in the loop on all things AI? Subscribe to our newsletter or share this article with your fellow enthusiasts.
