Which Nvidia (NASDAQ:NVDA) pick holds the highest potential for growth?
At a $1.79 trillion market cap, Nvidia (NVDA) stock is now worth 45% of Japan’s nominal GDP of $3.93 trillion. That a single company has that weight speaks volumes on investor expectations. NVDA shares have increased 50% in 2024 and 251% over one year.
With the investing focus this high, Nvidia’s moves are highly scrutinized. On February 14th, the company released its Form 13F, required by the Securities and Commission Exchange (SEC) every quarter to disclose long positions in publicly traded securities.
Of the five companies listed in the Form 13F submission, three are AI-focused. What are their business models with Nvidia giving them a stock valuation boost this week?
Nano-X Imaging Ltd.
As ChatGPT popularized AI’s capacity to tackle human tasks, one of the most prominent ones is medical diagnostics. Given that neural networks train on vast quantities of data, it stands to reason that AI would be faster and more accurate than humans in reading and interpreting medical documentation.
Nano X's (NASDAQ:NNOX) business model revolves around cost-effective medical imaging via the pay-per-scan model. For instance, Nanox.ARC is the company’s digital Tomosynthesis system to visualize radiographic data.
Image credit: Nano-X Imaging
Because such equipment is expensive, the company’s pay-per-scan model ($30 per scan) leverages cloud-based infrastructure, Nanox.CLOUD, to integrate it into a global ecosystem of medical imaging solutions.
This approach is disruptive, giving Nano-X a first-mover advantage. The company adds a layer through the Nanox AI subsidiary by using deep-learning analytics. One of them is the FDA-cleared HealthFLD that automates CT imaging analytics in disease detection, ranging from cardiovascular and bone conditions to early signs of fatty liver.
Nano-X delivered its latest Q3 2023 earnings report on November 28th, with the next scheduled for March 14th, 2024. The company generated 4.1% more revenue from a year-ago quarter, at $2.5 million. For the nine months in 2023, Nano-X had a $50.5 million net loss compared to a $60.4 million loss the year prior.
“it would take longer than we originally expected to generate revenues, gross profit, and positive operating cash flows in the AI and Teleradiology business segments.”
Accordingly, the company tracked $32.3 million negative cash flow from operations, holding $95.6 million in cash and cash equivalents as of September 30, 2023. Nonetheless, based on its potential, NNOX stock is listed as a “strong buy” according to three analyst inputs pulled by Nasdaq. The average NNOX price target is $18 vs current $12.95 per share. Over a month, NNOX stock is up 141%.
SoundHound AI Inc.
Also known as Houndify, the company’s ultimate goal is to disrupt voice acting using AI. Through its Houndify SDK, Houndify Cloud and Houndify Studio solutions, developers can craft customizable voices across a wide range of applications.
In addition to training custom voice AI models, Houndify provides speech recognition, text-to-speech, and natural language comprehension. The company’s business model is freemium, where the basic version is for free akin to a demo account, but more advanced features are only available to paid subscribers.
Given the potential for growth based on recurring subscription streams and low operating costs, SoundHound AI (NASDAQ:SOUN) stock is up 95% over a month. SoundHound AI reported its latest Q3 2023 earnings in November, with the next scheduled for March 5, 2024.
The company’s revenue increased to $13.3 million, up 19% year-over-year, improving its net loss by 33% for the same period. Compared to a year-ago quarter when it held $10.8 million in cash, SoundHound’s total cash was $110 million in Q3. For the next Q4, the company expects revenue to increase to the $16 – $20 million range.
Based on six analyst inputs pulled by Nasdaq, SOUN stock is a “strong buy.” The average SOUN price target is $4.67 vs the current $3.81 per share.
TuSimple Holdings Inc.
Founded in 2015, Tusimple's goal is to make autonomous driving in the trucking sector a reality, specifically via the SAE Level 4 autonomous technology, which was already approved for fully driverless truck testing in Shanghai, China.
TuSimple’s timeline of accomplishments, image credit: TuSimple Holdings
Having received the Nvidia boost, TSPH is up 103% over the week. However, on January 17th, the company decided to voluntarily delist and deregister the Company’s common stock from Nasdaq.
“The Company’s valuation and liquidity have declined, while the Company’s stock price volatility has increased significantly. Accordingly, the Special Committee determined that the benefits of remaining a publicly traded company no longer justify the costs.”
To leave the US market and orient towards China and Japan, TuSimple should likely be available as ADS/ADR security later.
Arm Holdings
On the other hand, Nvidia’s other pick, Arm Holdings (NASDAQ:ARM), is already available to US investors as American Depositary Shares (ARM). The ARM stock is up 80% over a month. Although not AI-focused, the company is closely related to Nvidia.
Its business model centers around license fees and royalties for its semiconductor designs, as covered in November. Based on 24 analyst inputs pulled by Nasdaq, ARM stock is a “strong buy.” The average ARM price target is $100.29 vs the current $128. The high estimate is $130, while the low forecast is $72.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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