Nvidia Has 95% of Its Portfolio Invested in 2 Brilliant AI Stocks

Key Points

• Nvidia has 95% of its stock portfolio invested in CoreWeave and Arm, two companies benefiting from growing demand for artificial intelligence infrastructure.

• CoreWeave has been recognized as the best artificial intelligence cloud platform on the market, but its net loss widened in the recent quarter as interest payments increased.

• Arm has rapidly share in data centers as companies have prioritized power efficient chips amid the proliferation of power-hungry artificial intelligence workloads.

• 10 stocks we like better than CoreWeave ›

Nvidia (NASDAQ: NVDA) owns stock in publicly traded companies as part of its treasury strategy. Its $4.3 billion portfolio included six positions as of the June-ending quarter, but two accounted for 95% of invested assets: 91% was allocated to CoreWeave (NASDAQ: CRWV) and 4% was to Arm Holdings (NASDAQ: ARM).

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CoreWeave: 91% of Nvidia's stock portfolio

CoreWeave provides cloud infrastructure and software services purpose-built for artificial intelligence (AI) workloads. The company currently owns 33 data centers across the United States and Europe. SemiAnalysis recently ranked it as the best AI cloud on the market for its unmatched performance, awarding it higher scores than competitors including Amazon, Microsoft, and Alphabet's Google.

CoreWeave has a close relationship with Nvidia that often lets it bring new chips to market before other cloud providers. For instance, it was the first cloud to offer Nvidia H100 and H200 GPUs, and the first to offer Nvidia GB200 (Grace Blackwell) superchips. Cutting-edge infrastructure combined with industry-leading performance has helped CoreWeave win big customers including Microsoft, OpenAI, and Nvidia.

CoreWeave reported second-quarter financial results that beat estimates on the top and bottom lines. Revenue increased 206% to $1.2 billion, and non-GAAP operating income, which does not include interest payments, climbed 134% to $200 million. However, when interest payments on debt are included, the company's non-GAAP net loss widened to $131 million.

Investors should be aware of two risks. First, Microsoft contributed 71% of revenue in the quarter, meaning CoreWeave is highly dependent on a single customer. Second, capital expenditures are expected to top $20 billion this year, more than double last year, as the infrastructure buildout accelerates. That trend could cause CoreWeave to take on more debt, and interest payments already consumed 22% of revenue last quarter.

CoreWeave trades at 12 time sales, a reasonable valuation for a company whose revenue is forecast to grow at 88% annually through 2027. The stock is priced at $100 per share, and analysts have mixed opinions about where its headed. Targets range from $32 per share at the low end, implying 68% downside, to $180 per share at the high end, implying 80% upside. I think patient investors comfortable with volatility can buy a very small position today.

Arm Holdings: 4% of Nvidia's stock portfolio

Arm is a somewhat atypical semiconductor company. Rather than selling chips, it designs central processing unit (CPUs) architectures and related technologies such as systems and software development tools. Arm then licenses its intellectual property to companies that build custom CPUs in end markets such as mobile devices, data centers, and automotive systems.

Arm's power-efficient architecture has helped the company capture 99% market share in smartphones, but that quality has more recently driven demand in data centers as power-intensive AI workloads have proliferated. In fact, Amazon, Microsoft, and Alphabet have designed Arm-based CPUs, as has Nvidia. Consequently, more than 70,000 enterprises run AI workloads in data centers on Arm chips, a 14-fold increase from 2021.

Arm reported disappointing financial results in the June-ending quarter, missing sales estimates on lower licensing revenue and light royalty revenue. Total sales increased 12% to $1 billion, operating margin contracted 8 percentage points primarily because of increased R&D spending, and non-GAAP net income fell 13% to $0.35 per diluted share. But the company expects sales growth to accelerate to about 25% in the current quarter.

Arm recently began licensing compute subsystems (CSS), which are essentially blueprints that combine CPUs with other chip components to help customers develop new products faster. The number of CSS customers more than doubled in the last quarter, and that trend bodes well for Arm because CSS licenses entitle the company to more royalty revenue than CPU design licenses alone.

Wall Street expects Arm's adjusted earnings to grow at 23% annually through the fiscal year ending in March 2027. That makes the current valuation of 87 times adjusted earnings look expensive. But analysts have underestimated the company in the past. Arm beat the consensus earnings estimate by an average of 11% in the past six quarters. With that in mind, patient investors could buy a very small position today, but waiting for a cheaper entry point would be prudent.

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Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.