What's one of the best ways to turbocharge the stocks of small technology companies? Reveal significant investments in those companies by a giant technology leader.
That's exactly what happened last week as Nvidia (NVDA 0.40%) disclosed stakes in two small artificial intelligence (AI) companies. Who are these AI companies? Why did Nvidia buy their stocks? And should you buy them, too?
Nvidia's filing to the U.S. Securities and Exchange Commission (SEC) revealed ownership of over 1.19 million shares in Nebius Group (NBIS 8.05%) at the end of 2024. This stake shouldn't have been surprising, though. Nebius announced in December 2024 that it had entered into definitive agreements for private placement financing of $700 million. Nvidia was one of the participants in this financing.
Nebius Group's core business focuses on AI infrastructure. The company operates an AI-centric cloud platform with a large data center located in Finland. As you might expect, Nebius partnered with Nvidia and uses the huge company's GPUs to power its servers.
AI infrastructure isn't Nebius' only business, though. It also owns Toloka, which helps customers prepare data for use in training models using AI and human experts who review and label data. The rapid growth of generative AI has opened a big market opportunity for the unit.
Nebius' third business is TripleTen. It operates a leading online education platform that trains individuals in business intelligence analytics, cybersecurity, data science, quality assurance, and software engineering.
Finally, the company's Avride unit is a Texas-based developer of self-driving car technology and delivery robots. Autonomous vehicles using its technology have been driven more than 22 million miles with no serious accidents.
Speaking of autonomous vehicles, Nvidia also invested in Chinese self-driving car company WeRide (WRD 28.25%) in the fourth quarter of 2024. Nvidia's SEC filing revealed it owned nearly 1.74 million shares of WeRide at the end of the year.
WeRide has been very busy in its home country. In July 2024, the company launched the first unmanned sanitation project in the Chinese city of Dongguan. The next month, WeRide began using its Robosweeper autonomous road-sweeping vehicle in Shantou. It secured approval in August to begin charging fares for a Robobus self-driving bus service in Hengqin.
But WeRide's operations aren't limited to China. The company is working with Uber Technologies to offer robotaxis in the United Arab Emirates. It partnered with Beti, a leading French automated mobility provider, to launch Robobus services in France. WeRide also offers Robobus in Singapore and has plans to expand its Robosweeper business into the Asian country.
Investors shouldn't buy shares of Nebius Group and WeRide solely because Nvidia did. For one thing, Nvidia was able to secure stakes in the two companies for much less than the price you'll have to pay for either stock now.
Importantly, neither of these two small companies is profitable yet. Nebius posted a net loss of $96.8 million in its latest quarter with revenue of only $5 million. WeRide's revenue declined year over year to $10 million in its last reported quarter with a net loss of $148.6 million.
Both Nebius and WeRide face deep-pocketed rivals. Nebius battles cloud services giants including Amazon, Alphabet's Google Cloud, Microsoft, and Oracle in its core AI infrastructure business. WeRide and Nebius' Avride could compete against Alphabet's Waymo and Amazon's Zoox units as well as other big players.
However, I think aggressive investors with plenty of patience might find Nebius to be an interesting speculative pick. Its data center's energy efficiency helps give Nebius a lower total cost of ownership than competitors. The AI data center market is also growing fast enough to support multiple winners. Nebius' other businesses provide additional growth paths as well.
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