Nvidia spreads investments into smaller cap AI stocks

US tech giant Nvidia is spreading its investments into smaller-cap AI companies, which will help promote the adoption of its products.

This comes as demand for its graphics processing units (GPUs) is on an increase and projected to remain firm supported by continued adoption of the AI technology across sectors. Nvidia supplies AI chips for gaming industry, AI researchers, automotive industry, and data centers.

Nvidia sinks $71m into smaller AI companies

While the strong demand for AI chips is helping Nvidia generate excess revenue, the company is also looking at ways of putting that money to good use. One of the initiatives the tech giant has taken is investing in smaller cap AI firms.

These smaller firms help Nvidia spread the adoption of its products as they are also seeing strong demand for AI products. In line with its strategic investment initiatives, the company has invested a cumulative $71 million into these smaller companies.

The initiatives are also giving the chip-making firm a competitive edge over its industry peers.

Nvidia’s third quarter filing 13F filing shows that the company holds 1.7 million shares in SoundHound AI, a voice assistance tech company.

The same filing also shows Nvidia has interests in data center building firm Applied Digital. As at end of the third quarter, Nvidia’s investment into the SoundHound AI and Applied Digital was valued at $8 million and $63 million respectively.

Why Nvidia picked the two counters

According to The Motley Fool, it is worth following Nvidia into these two counters that have an impact on the tech giant’s AI products. SoundHound AI, is a small business with a total market capitalisation of about $2.3 billion and its share price has nearly tripled in share price over the last 12 months.

The company has also experienced strong demand for its AI-enabled voice technology. Its third quarter revenue has surged by 89% year on year driven partly by extra revenue collected from the acquisition of Amelia, an AI software company.

Amelia is helping SoundHound expand its tech to more markets outside of auto and restaurants although these core markets continue to provide tremendous momentum for the business, according to The Motley Fool.

SoundHound and Nvidia earlier this year teamed up to offer voice AI assistance through Nvidia’s DRIVE platform.

As for Applied Digital, the company is seeing strong demand for GPUs coming mainly from data centers. The company is relatively small but benefiting from this opportunity coming from data centers.

With a total market cap of $1.8 billion, Applied Digital’s share price has surged by 112% over the past year.

Applied Digital, which specializes in building data centers for cloud services, AI, and cryptocurrency mining, recorded its revenue for the last quarter grew 67% year on year.

Interest in the company is reportedly starting to ramp up significantly for large customers for 2025 and 2026.

The company has limited resources due to the nature of its smaller size. During the last quarter, Applied Digital reported an adjusted net loss of $4 million. According to The Motley Fool, this is where Nvidia’s investment becomes pivotal for the firm’s growth prospects.

Nvidia’s investment and other accredited investors helped strengthen the company’s finances, which will ultimately fuel investments in high-return projects to drive more growth. Nvidia is also benefitting from its contribution to more data center developments which means more sales for its GPUs.

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