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Nvidia Recently Bought 5 Artificial Intelligence (AI) Stocks. These 2 Stand Above the Rest. | The Motley Fool

๐ŸŒˆ Abstract

The article discusses Nvidia's recent investments in other AI companies, including Arm Holdings and SoundHound AI, and the potential implications of these investments.

๐Ÿ™‹ Q&A

[01] Nvidia's Investments in AI Companies

1. What are the key AI companies that Nvidia has invested in?

  • According to the article, Nvidia has invested in the following five AI companies in the fourth quarter of 2023:
    • Arm Holdings
    • SoundHound AI

2. Why did Nvidia invest in Arm Holdings?

  • Arm built the architecture that companies like Nvidia, AMD, and Apple use to design their chips.
  • Arm's technology is critical for the future of AI, as it is used in 99% of smartphones and is expected to capture 50% of the Windows PC market within 5 years.
  • Nvidia's new GPU architecture, Blackwell, combines Nvidia GPUs with Arm-designed CPUs, indicating the importance of Arm's technology for advanced AI models.

3. What are the key points about Nvidia's investment in SoundHound AI?

  • SoundHound is using voice recognition technology to create a portfolio of AI-powered virtual assistants that can hold conversations without the user typing.
  • SoundHound's technology is being used in the restaurant industry for autonomous order-taking, as well as in vehicles to provide AI-powered voice assistants.
  • SoundHound has a large order backlog worth $682 million, but is also losing a significant amount of money and may need to raise additional cash through an equity offering, which could dilute existing investors.

[02] Valuation Considerations

1. How do the valuations of Arm Holdings and SoundHound AI compare to Nvidia?

  • Arm Holdings has a higher price-to-sales (P/S) ratio of around 44, compared to Nvidia's P/S ratio of around 37, despite Nvidia's expected revenue growth of 98% this fiscal year.
  • SoundHound AI has a slightly more reasonable valuation, with a P/S ratio of just over 30, but the company is losing a significant amount of money and may need to raise additional cash.

2. What are the risks associated with investing in Arm Holdings and SoundHound AI?

  • Arm Holdings' stock is currently trading at a high valuation, and investors may want to wait for a pullback before buying in.
  • SoundHound AI's significant losses and need for additional cash raise concerns about the risks for investors.
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