It's no Berkshire Hathaway -- at least not yet. But Nvidia (NVDA +8.74%) has for some years been taking a page out of the Warren Buffett playbook and investing some of its considerable cash hoard in the stock market.
Today, the company has $63.4 billion invested in stocks, representing a big chunk of its overall cash position of $80.6 billion. And according to a newly released Securities and Exchange Commission filing, that portfolio includes a major new stake in Elon Musk's Space Exploration Technologies (SPCX +0.89%), known as SpaceX.
Here's why this is a bold move for Nvidia and one big reason why CEO Jensen Huang likes the company so much.
Nvidia CEO Jensen Huang. Image source: Nvidia.
Nvidia's portfolio is growing fast
At the end of March, Nvidia reported just $18.4 billion in stock holdings. More than half of the total was in the form of a $9.5 billion stake in rival chipmaker Intel. That means, in just one quarter, its portfolio of investments in public companies grew by $45 billion, or about 250%, even as the S&P 500 (^GSPC +0.72%) grew by just 14.9%. How is that possible?
Well, for one thing, Intel's stock took off, rising by 216.4% during Q2. That grew Nvidia's stake from $9.5 billion to a jaw-dropping $30 billion, and accounted for nearly half of the increase.
NASDAQ: INTC
Key Data Points
The other half was thanks to its $21 billion stake in SpaceX. Nvidia bought 122.7 million shares of the space launch and AI company. Together with a $4.5 billion increase in Nvidia's Nebius holdings, Nvidia put $25.5 billion in new money into its holdings, which accounted for about half of the portfolio's value increase.
That means 75% of Nvidia's portfolio is now concentrated in just two stocks: Intel (44.2% of the portfolio's value) and SpaceX (30.9%). Its other six holdings each represent single-digit percentages. Clearly, the Intel stake has paid off handsomely. SpaceX, on the other hand, is now trading at about $139 per share -- just above the $135 IPO price, and below its first trading price of $150 per share.
Why would Nvidia make such a big investment in a company widely thought to be overvalued?
Image source: The Motley Fool.
Huang and Musk's mutual admiration
Both Nvidia CEO Jensen Huang and SpaceX CEO Elon Musk have been highly complimentary of one another in the past.
On SpaceX's most recent earnings call, Musk sang the praises of Nvidia's products:
Going forward, we've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best. We think it's the best AI computer, and we greatly value our close cooperation and partnership on many levels with Nvidia. So, we're exclusive to Nvidia.
For his part, Huang has also heaped praise on SpaceX's Grok chatbot and Tesla's vehicles, calling them "world-class" and referring to Musk as an "extraordinary engineer." In describing how Musk retains large amounts of information across multiple disciplines in his head, Huang even called Musk "the ultimate GPU."
Huang has also expressed gratitude for Musk's early support of Nvidia's first AI-focused system, the DGX-1. "When I announced DGX-1, nobody in the world wanted it," he told podcast host Joe Rogan, "Except for Elon."
Given that Nvidia is now the world's primary provider of AI computer infrastructure, it's no wonder that Huang is happy to repay Musk's confidence in kind by green-lighting a major SpaceX stake.
