Nvidia’s Golden Handshake: 3 Stocks Reaping the Rewards of an NVDA Alliance

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The AI craze may be slowing, but that doesn’t mean there’s not plenty of opportunity available. While investing heavily in Nvidia (NASDAQ:NVDA) could keep the cash coming in (considering its recent performance), there’s a more cost-effective strategy to leverage Nvidia’s growth: investing in Nvidia partner stocks, which stand to benefit from Nvidia’s expansive influence across various industries.

Nvidia collaborates with a broad network of subcontractors and manufacturers, essential for producing and distributing its advanced technologies. By identifying and investing in these Nvidia partner stocks, you can diversify your portfolio beyond direct Nvidia investments and tap into broader industry trends. Moreover, these Nvidia partner stocks often come at a lower price point than Nvidia’s shares, offering a valuable opportunity for those seeking bargains in the AI sector. This approach lets you capture Nvidia’s upside while mitigating the risks of investing in a single high-priced stock.

Recursion Pharmaceuticals (RXRX)

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Recursion Pharmaceuticals (NASDAQ:RXRX)) shares surged last year as one of the first Nvidia partner stocks to make major waves, sparked by a significant $50 million investment from Nvidia. However, since reaching a peak that month, RXRX’s stock has sharply declined, now trading at about half of its 2023 peak. Despite the downturn, Nvidia’s enthusiasm for Recursion remains unchanged.

Recursion leverages AI technology to rapidly and accurately identify cross-gene relationships and interactions within its vast and continuously growing genetic dataset. The standout feature of their platform is its capability to shorten drug discovery timelines through generative AI processes significantly. Traditionally, drug discovery is a lengthy and complex process that involves determining which compound combinations are effective in gene interactions.

Manually managing this process involves navigating through millions of data points, which can be as daunting as finding a needle in a haystack. Recursion’s innovative and effective AI platform has the potential to revolutionize therapeutic development. With Nvidia’s backing, Recursion not only gains a strategic partner but also stands poised to capitalize on this transformative approach to drug discovery.

Fabrinet (FN)

Source: iStockphoto

Fabrinet (NYSE:FN) manufactures precision electronic and technical subcomponents, similar to how automotive manufacturers outsource parts like doors before assembling the final vehicle. In this analogy, Fabrinet supplies critical components such as optical communication parts and advanced lasers to major firms, including Nvidia and Cisco (NASDAQ:CSCO).

The rapid growth of the semiconductor and artificial intelligence sectors will continue boosting Fabrinet significantly — not to mention its longstanding relationship with Nvidia. Following a few strong quarters, analysts revised price targets for Fabrinet as high as $260, reflecting AI’s continued market strength and benefit to Nvidia partner stocks. Shares surged 25% since January, but the company continues to trade below the new price target.

While Nvidia contributes 13% of Fabrinet’s revenue, the company’s prospects are not solely tied to one client. Many AI and data communication firms are turning to Fabrinet for its specialized manufacturing capabilities. Ultimately, Fabrinet’s success among Nvidia partner stocks isn’t solely contingent on Nvidia’s success; it also stands to gain from the sector’s continued growth.

SoundHound AI (SOUN)

Source: T. Schneider / Shutterstock.com

I first looked at small-cap tech stock SoundHound AI (NASDAQ:SOUN) in November 2023, well before it took place among Nvidia partner stocks. Since then, the core thesis supporting its unique position remains unchanged, but the stock has gained new popularity among investors.

The big picture bull case is that SoundHound is on the brink of significant growth as it carves a niche in the underexplored voice recognition sector. The market for voice recognition technology is expanding, as demonstrated by SoundHound’s applications in enhancing restaurant efficiency. Companies like SoundHound show that their market reach depends on how effectively they adapt their technology to meet diverse needs rather than trying to target their market narrowly.

Recently, Nvidia underscored SoundHound’s potential and brought it into the Nvidia partner stocks club by making a multi-million-dollar investment in the company. Nvidia had previously participated in SoundHound’s $75 million funding round in 2017 and staked another $3.7 million in the stock in March. First investing well before the current AI hype, Nvidia’s ongoing support indicates a long-term interest in SoundHound’s trajectory. Continued backing from Nvidia suggests a bright future for SoundHound, and its status among Nvidia partner stocks remains strong.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.

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