As the artificial intelligence (AI) revolution rolls on, one company that has been leading the juggernaut is Nvidia (NVDA). The trillion-dollar chip designer has been at the forefront of the AI frenzy, and its quarterly earnings report tonight is expected to move not just the wider semiconductor industry, but the entire stock market. So, when Nvidia makes a $76 billion investment into just one small company, growth-minded investors sit up and take notice.
And while the tech titan’s investments into a couple of smaller AI chip stocks dominated the headlines, Nvidia’s $76B bet outside the semiconductor space is notable for another reason – the Jensen Huang-led company made a huge investment in a stock that’s also held by the flagship fund of maverick investor Cathie Wood. In fact, NVDA’s betting quite a bit bigger than Cathie, given that Wood’s ARK Innovation ETF (ARKK) owns just 13.5 million shares at a current market value of about $170.3 million.
So, why is Nvidia upping the ante on this Cathie Wood stock? Here’s a closer look.
About Recursion Pharmaceuticals Stock
Based out of Salt Lake City, Recursion Pharmaceuticals (RXRX) was founded in 2013 by former Rice University PhD graduates Christopher Gibson and Blake Borgeson. Recursion Pharma is a clinical-stage biotech company aiming to “industrialize drug discovery” by using data science and automation to develop new treatments faster and more efficiently.
Recursion has yet to be profitable, and in its most recent quarterly results, the company reported a wider-than-forecast quarterly loss. However, for a growing biotech company, this is to be expected to some degree.
In the September quarter, Recursion’s losses widened to $0.43 per share from $0.35 in the year-ago period. Revenues also slid by 20% from the previous year to $10.5 million, which management attributed to the timing of workflows from its strategic partnership with Roche-Genentech.
Operating costs rose by 45.4% from the previous year to $110.1 million, which was a primary driver behind the steeper-than-forecast losses. It’s worth pointing out that R&D costs were up 71.4% year-over-year, and increased spending here is generally seen as a positive for a biotech company like Recursion, which must always innovate to expand and upgrade its capabilities.
The company ended the September quarter with a cash balance of $397 million, while its long-term liabilities remained almost unchanged from the beginning of the year, at $44.3 million.
Recursion is expected to report earnings again on Feb. 26, with Wall Street looking for a per-share loss of $0.46 for the fourth quarter.
Recursion Partners with Nvidia
Management may provide more color about its partnership with Nvidia on theearnings call as Recursion works to develop BioHive-1, its on-premise supercomputer. Aiming for completion in the first half of 2024, it’s targeted to be the most powerful supercomputer owned and operated by any biopharma company.
Notably, Recursion’s proprietary RecursionOS has access to about 50 human cell types, an in-house chemical library of approximately 1.7 million compounds, and an in silico library of over 1 trillion small molecules helmed by a team of 550 life scientists and computational and technical experts – a massive data set that can be leveraged and optimized via AI.
Also in partnership with Nvidia, Recursion is developing its LOWE drug discovery software and interface, which the company claims “can be used by any of our scientists from the comfort of their laptop.” Apart from in-house use, Recursion can sell the LOWE software to other biotech companies, providing it with another revenue stream.
Separately, three drug candidates from Recursion Pharmaceuticals are currently undergoing Phase 2 clinical trials. REC-994 is being evaluated for safety, tolerability, and potential effectiveness in treating patients with cerebral cavernous malformation (CCM), a rare neurological condition characterized by abnormal blood vessel development in the brain. REC-2282 is being investigated for patients with Neurofibromatosis Type 2 (NF2), a genetic disorder that causes tumors to grow on nerves and other tissues, while REC-4881 is being studied for gastrointestinal conditions and specific cancer mutations.
Finally, Recursion has upgraded its partnership with pharma giant Bayer, under which Bayer will pay Recursion increased per-program milestones, which may be up to $1.5B for up to 7 oncology programs, as well as royalties on net sales.
What Do Analysts Expect from RXRX Stock?
Forward revenue growth for RXRX is pegged at 72.9%, which is well above the healthcare sector median. However, at 55 times forward revenue, the shares are priced at a premium.
Analysts remain somewhat optimistic about Recursion stock, which has an average rating of “Moderate Buy” from the 7 analysts in coverage. However, the mean target price of $12.33 is a premium of just 1.5% to current levels, indicating additional upside potential may be limited from here.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
