Nvidia and Eli Lilly Are Partnering on a $1 Billion Lab. Here's What Investors Need to Know.

In a corporate partnership many investors didn't see coming, chip maker Nvidia (NASDAQ: NVDA) and pharmaceutical company Eli Lilly (NYSE: LLY) say they are collaborating to build and operate a joint research lab. This plan was unveiled at the annual JPMorgan Healthcare Conference in January.

The pair, both titans of their respective industries, aren't typically seen as compatible businesses, but this lab holds great promise for their respective research efforts. Here's why.

Image source: Nvidia.

A top team

The move might not have been surprising to observant Eli Lilly and Nvidia watchers. After all, last October, the pharmaceutical company announced it had drafted the chip manufacturer to help it build a supercomputer to assist in the early stages of drug development.

Given that, it was not a huge step forward to agree to build the lab together. The companies will allocate up to $1 billion in construction, personnel, and computing costs over a five-year stretch to build, staff, and equip the facility. Its computer "brains" will be powered by Vera Rubin chips, Nvidia's latest artificial intelligence (AI) processors.

The two companies stated that researchers from each would collaborate in a collective effort to generate new data, helping to train AI models that can advance the drug discovery process.

This is a hot trend in the biotech and pharmaceutical spheres at the moment. Traditionally, drug discovery has been a long and at times agonizingly slow -- not to mention expensive -- process, even for companies with considerable resources. AI holds the promise of making that undertaking far quicker. And of course, cheaper.

In Eli Lilly's press release, the company quoted its CEO, David Ricks, as saying that "Combining our volume of data and scientific knowledge with Nvidia's computational power and model-building expertise could reinvent drug discovery as we know it."

"By bringing together world-class talent in a start-up environment, we're creating the conditions for breakthroughs that neither company could achieve alone," he added.

A win-win partnership

For once, this isn't corporate hype or hot air. Fusing the considerable resources of Eli Lilly and Nvidia together holds immense promise for not only advancing drug discovery but also changing how it's done forever -- and permanently for the better.

The benefits to Eli Lilly are obvious, but Nvidia also gains here, as it acquires expertise and renown in the field. It'll also help tie its reputation to AI healthcare advances, which in turn will enhance its standing as a go-to hardware producer for an industry that is already embracing AI.

Even if the project experiences delays or is completed on a more modest scale, I believe it still has great potential to advance AI-enhanced discovery. With that, it'll not only benefit the businesses of both Eli Lilly and Nvidia but also be beneficial for the world's health generally.

This is a project to keep an eye on for anyone invested in -- or otherwise involved -- in either medicine or technology, regardless of whether they're invested in one or both companies.

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.