If artificial intelligence (AI) is the new gold rush, Nvidia (NASDAQ: NVDA ) is the largest supplier of picks and shovels. The strong demand for Nvidia's graphics processing units (GPUs) is mind-boggling.
But Nvidia isn't just helping big corporations build and deploy AI models. It has also invested in several potential rising stars of the AI world. According to Wall Street, these Nvidia-backed stocks could rise 73% to 89%.
1. Nano X-ray imaging
Nvidia has only a small share. Nano X Imaging (NASDAQ: NNOX ) Worth about $583,000 at the end of the first quarter of 2024. However, Wall Street has high expectations for this small medical technology company.
Only three analysts conducted the survey. LSEG (OTC: LNST.Y) Covered Nano-X Imaging in June. Two of them rated the stock as a “buy” and the third recommended it as a “strong buy”. The average 12-month price target for Nano-X shows upside potential of 89%. Even the most pessimistic analyst believes the stock could rise nearly 60 percent more.
Nano-X-ray imaging develops medical imaging technology that is much more cost-effective than conventional X-ray systems. The company also has a subsidiary Nanox.AI that uses AI to diagnose undiagnosed chronic diseases.
2. Recursion Pharmaceuticals
Nvidia owns more than 7.7 million shares. Recursion Pharmaceuticals (NASDAQ: RXRX ). At the end of Q1, the position was valued at approximately $77 million. Although Recursion's shares have fallen significantly since then, analysts believe the stock will rebound.
The average 12-month price target for Recursions Pharmaceuticals is 73% higher than the current share price. The lowest price target shows 21% upside potential. Interestingly, only two out of six analysts surveyed by LSEG in June rated Recursion as a “buy.” Others have a “Hold” rating on the stock.
Recursion refers to itself as a “TechBio” company rather than a biotech company to highlight its focus on using technology for drug discovery and development. Its BioHive-2 supercomputer uses 63 Nvidia DGX H100 GPUs and 504 Nvidia H100 Tensor Core GPUs. BioHive-2 uses AI models to discover new drugs. It is the world's fastest supercomputer, wholly owned and operated by a biopharmaceutical company.
3. Sound Hound AI
Nvidia owns more than 1.7 million shares. Sound Hound AI (NASDAQ:SOUN). That stake was worth about $10.2 million at the end of Q1. Soundhound has been a big winner so far in 2024 and its share price has nearly doubled.
Wall Street believes this momentum could continue. The average 12-month price target for SoundHound AI shows upside potential of around 79%. Four of six analysts surveyed by LSEG in June rated the stock a “buy” or “strong buy,” while the remaining two rated it a “hold.”
Soundhound AI is the most pure-play AI company among the three Nvidia investments. It is a leader in developing voice AI systems used by automakers, restaurants, smart TV makers, and other businesses.
Is Wall Street Right About These Stocks?
Wall Street analysts can stand out with their estimates for Nano-X Imaging, Recursion Pharmaceuticals, and Soundhound AI. On the other hand, they can be wrong. No one knows for sure how any stock will perform over the next 12 months. However, I agree with the general optimism about these two Nvidia-backed stocks.
Some of the major partners of Recursion Pharmaceuticals are, Roche And Bayer. The company plans to report results from seven clinical studies, including five Phase 2 trials, over the next 18 months.
Soundhound AI's revenue is growing fast, growing 73% year-over-year in Q1. The voice AI innovator targets a total addressable market of over $140 billion. SoundHound's customer base already includes a virtual “who's who” in the automotive and restaurant industries.
I'm not so optimistic about Nano-X. Despite the promise of its technology, the company's revenue is shrinking rather than growing.
Risk-averse investors probably won't find any of these stocks appealing. None of them are currently profitable. However, I think aggressive investors may particularly like Recursion and Soundhound AI — just like Nvidia apparently does.
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Keith Speights has no positions in any stocks. The Motley Fool has positions and recommends Nvidia. The Motley Fool has a Disclosure Policy.
These Nvidia-backed artificial intelligence (AI) stocks could rise 73% to 89%, according to Wall Street, originally published by The Motley Fool.