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' (NASDAQ: RXRX) 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 (NASDAQ: NVDA). 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.
Should you invest $1,000 in Recursion Pharmaceuticals right now?
Before you buy stock in Recursion Pharmaceuticals, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Recursion Pharmaceuticals wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 12, 2024
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
