Nvidia, Nano-X and the interpretation of 13F filings

The market seems quick to jump to conclusions

Nvidia - the dominant maker of graphics and artificial intelligence chips - has a holding in Arm Holdings - the owner of patents around reduced instruction set chips used in mobile phones.

Arm stock has risen 100 percent in the past six months.

I make no comment about the valuation of Arm or Nvidia - both of which are wonderful companies.

One consequence of Arm’s rise is that the value of the stake held by Nvidia tripped over $100m.

This means that Nvidia - like an institutional investor - has to file a 13F which details all their holdings.

There are not many - a grand total of five shares have been held.

One of those shares is Nano-X imaging and Nvidia holds a grand total of $380 thousand dollars worth.

The market is presuming that Nvidia consciously purchased that (trivial) stake and thus Nano-X is worthy of attention from the giant Nvidia. Nano-X stock is up 50 percent today to a market cap of $550 million.

This seems an extreme move - hundreds of millions in additional market cap for a trivial purchase.

But it is even more extreme when you work out where and why Nvidia obtained the Nano-X position.

Nano-X purchase of Zebra Medical Vision

In 2021 Nano-X purchased a company called Zebra Medical Vision.

You can find the press release here.

There are two key quotes. Firstly the consideration paid:

[Nano-X] announced that it has entered into an agreement to acquire a leading medical artificial intelligence (AI) developer Zebra Medical Vision for a total of $100 million upfront, and up to another $100 million tied to achievement of specific milestones, all to be paid in Nanox shares.

and the list of investors in Zebra Medical Vision:

[Nano-X] is funded by Khosla Ventures, Marc Benioff, Intermountain Investment Fund, OurCrowd Qure, Aurum, aMoon, Nvidia, J&J and Dolby Ventures.

Put these together and you realise that:

1. Nvidia did not consciously choose to buy Nano-X stock, and

2. Nvidia either owned a trivial amount of Zebra Medical and hence a trivial amount of Nano-X or Nvidia has sold most of the Nano-X stock it obtained.

Now explain why Nano-X stock is up 50 percent?

Ah - it is the bull market stupid.

This is not the sort of thing you see at bottoms.

John

PS. A postscript is necessary. The 13F filing states that the holdings is DFND.

This acronym means that holding is managed by another reporting person. That is the decision to hold or sell the Nano-X holding literally does not belong to Nvidia. The trivial holding by Nvidia means therefore precisely nothing.