Nvidia was a $360 billion company at the beginning of 2023. Just 18 months later, it is now worth $3.1 trillion, making it the third largest company in the world after Microsoft And Apple.
Nvidia designs the most powerful graphics processing units (GPUs) for data centers, which developers use to build, train and deploy artificial intelligence (AI) models. In the recent first quarter of its fiscal year 2025 (ended April 28), those chips helped the company’s data center revenue soar 427% year-over-year to a record $22.6 billion.
Nvidia is now spreading some of that wealth by investing in smaller AI companies. This strategy is helping the sector grow and, if the bets pay off, could yield handsome returns for its own shareholders.
The Four Stocks Nvidia Owns
According to Nvidia’s latest Form 13F filed with the Securities and Exchange Commission on May 15, the chipmaker has a stake in the following AI companies:
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Arm Holdings (NASDAQ: ARM)who built the architecture that most semiconductor companies use to design their chips.
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SoundHound AI (NASDAQ: ZOE)that develops software for speech recognition and conversational AI.
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Nano-X Imagingthat uses AI to get better results from medical imaging.
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Recursion Pharmaceuticalsthat uses AI to support drug discovery.
It invested in every company by the end of 2023. Arm Holdings received the largest investment at about $147 million, which is more than Nvidia invested in the other three stocks combined. Today, that Arm position is worth $311 million thanks to a 130% gain on the stock in 2024.
Nvidia invested about $3.7 million in SoundHound AI and the stock price has risen 87% this year, bringing its value to $6.7 million.
Arm and SoundHound are the best artists, and here’s why it could stay that way.
Arm Holdings
Nvidia tried to buy Arm for $40 billion in 2020, but it was forced to abandon the deal after regulators said it was anti-competitive. That’s no surprise, as Arm built the architecture that many leading semiconductor manufacturers use to design their chips, including Nvidia and one of its closest competitors, Advanced micro devices.
Arm specializes in central processing units (CPUs), which are used in personal computers (PCs), smartphones, and even some of the GPUs designed by Nvidia to boost efficiency. The upcoming GB200, for example, is configured with a combination of two GPUs and two Arm-based CPUs, and is capable of running AI models at five times the speed of its flagship H100, which currently dominates the data center market. This will drive down costs for developers, who often pay per minute for computing power.
An estimated 99% of smartphone CPUs also use Arm’s architecture, so the company is overwhelmingly dominant in that segment. Additionally, Microsoft is integrating AI into its Windows operating system, which is driving a new wave of demand for next-generation chips from computer makers. Arm CEO Rene Haas believes his company can capture a 50% share of the Windows PC market within five years.
The company likely has a bright future, but investors should be wary of its high valuation before buying the stock. It generated $3.2 billion in revenue in fiscal 2024 (ending March 31), and based on a market cap of $169.8 billion, the stock trades at a price-to-sales (P/S) ratio of 53.
That makes it even more expensive than Nvidia stock, which has a P/S ratio of 38.7. Keep in mind that Nvidia is expected to nearly double its revenue in the current fiscal year of 2025, while Arm is only expected to grow its revenue by 23%. It doesn’t make much sense to pay a higher valuation for Arm relative to Nvidia, given that Arm is growing much more slowly.
Nvidia bought Arm shares at a much lower price than they are currently trading at, so investors would be wise to wait for a drop before jumping in on the party.
SoundHound AI
SoundHound AI has developed a suite of conversational AI software tools that have been deployed by companies in the hospitality, restaurant, and automotive industries. They can hold entire spoken conversations with a user, making them extremely useful in high-pressure environments where quick responses are required to serve customers.
The restaurant industry is using SoundHound’s new Employee Assist tool to give employees a helpful virtual assistant they can call at any time. It understands store policies and can even guide employees through creating menu items. The technology is also being used to take customer orders in a drive-thru lane, over the phone, and in-store.
White Castle, Chipotle Mexican GrillAnd Krispy Kreme are just some of the chains using it. With help from its acquisition of restaurant AI company SYNQ3, SoundHound now operates in 10,000 locations with another 100,000 in the pipeline, and management says the market it addresses includes 1 million restaurants and 30 million other businesses in North America. So the company has barely scratched the surface of what could be a $100 billion opportunity.
SoundHound’s in-car voice assistant is used by leading automotive brands such as Honda, HyundaiAnd Stellantis (which owns Jeep, Dodge and Chrysler). And the company recently partnered with Nvidia’s Drive platform to refine its voice assistant by delivering it on the edge, meaning users don’t need network connectivity to access it. That improves privacy and ensures it works even in geographic areas without network service.
SoundHound generated $11.6 million in revenue during the recent first quarter of its fiscal year 2024 (ended March 31), representing 73% growth over the same period last year. Backlog also increased 80% to a record $682 million, so there’s plenty of demand in the pipeline. Given that the stock is trading at a P/S of 19.5, it seems like a much better value than Arm.
However, SoundHound lost $33 million in the first quarter. Since the company only has $117 million in cash on hand, it will likely have to raise money by selling shares, which will dilute existing shareholders. Therefore, this stock should be reserved for investors with a high risk appetite.
Should You Invest $1,000 in Arm Holdings Now?
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Chipotle Mexican Grill, Microsoft, and Nvidia. The Motley Fool recommends Stellantis and recommends the following options: long Jan 2026 $395 calls on Microsoft and short Jan 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Owns 4 Artificial Intelligence (AI) Stocks, and These 2 Are Up the Most was originally published by The Motley Fool
