There’s nothing like a buy-in from a famous company to juice the price of a smaller stock. That was the dynamic that pushed Recursion Pharmaceuticals‘ (RXRX 13.83%) share price nearly 14% higher on Thursday, as a regulatory filing revealed the involvement of such an investor. That pop was far higher than the 0.6% gain of the S&P 500 index in the session.
An investor with deep pockets
The investing party is the Wall Street darling chipmaker of the moment, Nvidia (NVDA -1.68%). It disclosed that as of Dec. 31, it held investments in three companies developing artificial intelligence (AI) capacities for their businesses. Among them was Recursion, which is developing AI models for drug discovery.
Although Nvidia’s Recursion stake is not the largest of the trio in terms of dollar amount, it is substantial. It was valued at $76 million. That is relatively modest, as Recursion’s current market cap is nearly $2.7 billion.
The regulatory filing only disclosed Nvidia’s stakes in the three companies. (The other two, by the way, are specialty AI developer SoundHound AI and its longtime partner and peer Arm Holdings.) It did not detail Nvidia’s motivations for making the investments.
Supporting the AI scene
Regardless, it isn’t hard to tease out why Nvidia is willing to use its capital to support such businesses. The chipmaker is considered by many to be the leading manufacturer of next-generation chips capable of powering AI applications, so it has a vested interest in helping the developers of those applications succeed in their work. We shouldn’t be surprised if Nvidia expands this investment activity to other companies, or puts more money into any or all of the original trio.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
