3 Reasons NVIDIA Likely Loaded Up on WeRide (WRD) Stock

Nvidia (NASDAQ:NVDA) and its legendary leader, CEO Jensen Huang, have generated significant returns for many investors over the past couple of years. Indeed, even new investors who’ve put money to work in recent months have been rewarded by a firm that seems to have what it takes to make a run for the $5 trillion market cap milestone. Indeed, we’ve only begun to celebrate the AI chip leader’s move to become the world’s first $4 trillion firm. Now, with sights set on the future, investors ponder what the next big shift will be for the GPU juggernaut and the AI scene as a whole. 

Over the years, the firm has made some interesting bets on several tech innovators that can effectively utilize AI technologies. Indeed, perhaps it’s the Nvidia portfolio of investments that is worth a look for risk-taking, growth investors seeking to build a portfolio that’s forward-focused.

As always, just because a big name in AI is placing a bet in an up-and-comer doesn’t mean shares are destined for market-crushing gains.

A vote of confidence from the likes of Nvidia, I think, is about as good as it gets, especially for small- and mid-cap names that may be flying under the radar of most growth-minded investors looking to broaden their AI portfolio. Indeed, it’s tough to pick the winners when it comes to a theme, especially if you’re diving into the mid-cap waters for the first time. 

Either way, Nvidia’s investment and strategic dealings with autonomous vehicle firm WeRide (NASDAQ:WRD) are notable, especially considering where we stand in the so-called robotaxi race. In the fourth quarter of last year, Nvidia reportedly invested around $24 million in the firm. Indeed, it’s a drop in the bucket for Nvidia, but a big deal for the startup as it readies to make a mark in the robotaxi arena.

Here are three reasons that, in my opinion, Nvidia decided to place a bet in the little-known startup:

Reason #1: The robotaxi market may be on the cusp of a boom 

Nvidia’s investment and strategic dealings with autonomous vehicle startup WeRide are quite notable, especially considering where we’re at in the so-called robotaxi race. Elon Musk sounds so incredibly bullish as Tesla (NASDAQ:TSLA) looks to seize a brand-new market that could add a big chunk of value to its stock. With Waymo also rolling out at an impressive pace, the robotaxi market is sure to take investors for a ride over the next couple of years. In any case, the robotaxi scene is a high-growth corner of the market that more tech firms should seek exposure to.

At the end of the day, autonomous driving is very much an AI innovation. And while I have no idea which firms will ultimately rise out as the biggest gainers from the rise of robotaxis, I do think that there’s some strategic advantage to be had by having Nvidia in one’s corner.

In any case, WeRide has room for growth in China. Although it’s way too early to call a winner in that massive market, I do think WRD looks intriguing, though I wouldn’t load up on the stock right here, especially given the added risks in betting on Chinese stocks.

Reason #2: A strategic partnership could accelerate WeRide’s rollout

Getting GPUs from the world’s largest company could help WeRide take its already heated expansion in the Chinese market. Indeed, AI chips and all the sort do not come cheap. And with such an ambitious growth roadmap, cost is a significant factor that could hold self-driving startups back.

Either way, I view the collab with Nvidia as a way to get in the fast lane without impairing the balance sheet (which is in healthy shape now, by the way) as it builds its autonomous fleet with the backing of an industry giant.

Reason #3: WeRide could be well-positioned versus its rivals

Indeed, there are a slew of self-driving startups that Nvidia could have teamed up with. A WeRide investment may be a sign that the firm has what it takes (think management and its technological know-how) to succeed as it puts its foot on the gas to gain share in the fast-moving robotaxi market.

Of course, WeRide is a virtually unknown name in the space, especially in a market that seems to favor the resource-rich giants like Tesla and Waymo. With Nvidia’s backing, I do think WeRide is an intriguing mid-cap stock ($2.9 billion market cap) to keep close watch of in the robotaxi boom’s early days.

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