Why WeRide Stock Is Skyrocketing Today

WeRide (NASDAQ: WRD) is shooting to the moon in Friday's trading. The China-based autonomous driving company's share price was up 81% as of 1 p.m. ET and had been up as much as 146% earlier in the session.

WeRide's valuation is surging after artificial intelligence (AI) hardware leader Nvidia revealed in its new 13F filing that it purchased roughly 1.74 million shares of the Chinese company's stock in the fourth quarter.

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WeRide stock soars on Nvidia investment

As of this writing, Nvidia's position in WeRide is worth roughly $58 million. In the context of Nvidia's roughly $3.35 trillion market cap, that's a small investment.

On the other hand, it's also brought tons of new attention to WeRide -- and it wouldn't be surprising to see a sustained rally for the self-driving-technologies specialist as a result. Nvidia is arguably the most influential player in the AI space, and its endorsement carries a lot of weight. A similar situation played out last year after it was revealed that Nvidia had invested in SoundHound AI.

Notably, Nvidia's latest 13F filing showed that it had sold its stake in SoundHound AI, triggering a big sell-off.

What's next for WeRide

Following today's explosive gains, WeRide now has a market capitalization of roughly $8.3 billion. However, the company is still generating relatively little revenue. In its most recently reported quarter, it generated sales of just $10 million -- which actually marked a mid-single-digit decline from its performance in the prior-year quarter.

Nvidia clearly sees something in the company, and that's a bullish indicator. On the other hand, investors should keep in mind that WeRide is a high-risk, high-reward stock. SoundHound's example shows us there's no guarantee that Nvidia will continue to back WeRide over the long term -- and there's a risk the stock will see big sell-offs if the AI leader reduces its position.

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Keith Noonan 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.