Shares of several artificial intelligence (AI) stocks in various sectors are getting crushed this morning after the AI chip king Nvidia revealed in documents filed with the Securities and Exchange Commission (SEC) that it exited its position in these companies.
Shares of SoundHound AI (SOUN -25.54%) had fallen roughly 25% as of 10:40 a.m. ET today. Shares of Serve Robotics (SERV -39.20%) declined a whopping 38%, while shares of Nano-X Imaging (NNOX -10.79%) were down nearly 13%.
Publicly traded companies are allowed to invest in other publicly traded companies, a practice Nvidia has undertaken since last year. Nvidia naturally invested in other AI stocks. While it's impossible to know the exact reason Nvidia invested, it looks like Nvidia took an interest in many companies it believed could ultimately assist its business through some kind of partnership or perhaps grow the broader AI market.
In its recent 13-F filing with the SEC, which shows which stocks Nvidia owned at the end of each quarter, Nvidia no longer listed SoundHound AI, Serve Robotics, and Nano-X Imaging. At the end of the third quarter, Nvidia held a nearly $30 million stake in Serve Robotics, an $8 million stake in SoundHound AI, and a $362,000 stake in Nano-X Imaging.
Serve Robotics builds zero-emission robots currently used for food delivery, although the company plans to build these robots for further uses in the future. SoundHound AI builds AI-powered voice solutions that can interact with people and are highly useful for customer service. Nano-X Imaging is leveraging AI to help identify asymptomatic conditions associated with cardiac, liver, and bone diseases.
Nvidia has formed partnerships with SoundHound AI and Serve Robotics that are still in place, as far as the public knows. Management at Nvidia previously said it is working with SoundHound to develop generative AI and accelerated compute solutions for automobiles. Serve uses hardware and software built by Nvidia to power its robots.
Neither of these companies have yet to turn a profit, so while they are working on some incredible innovations, they are going to be volatile. Even so, SoundHound AI is the only one of these three that has really benefited from the AI trade, with its stock up 420% over the last year. While analyst coverage is limited, the few analysts that do cover each stock are bullish on these names and think there is significant upside potential.
While Nvidia is arguably the most respected AI company in the world, I wouldn't read too much into these sales as a reflection of these three companies. Ultimately, it's not clear exactly why Nvidia sold these stocks. It may have needed the capital for something else.
SoundHound AI, Serve Robotics, and Nano-X Imaging are all impressive companies but they have yet to make a profit, meaning you are effectively investing in late-stage start-ups, which can be risky and will likely lead to volatility. That's why I would keep positions small for now until there is more clarity on their growth and financial trajectories.
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