NVIDIA鈥檚 Hidden AI Play: The Truth Behind Its WeRide Investment
Shares of WeRide are up over 70% in a single day as a stake from Nvidia is announced, though it may not be what it seems on the surface.
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The market鈥檚 memory is still fresh when it comes to the volatility induced by the聽 flash sell-off that came from the . However, the relationship between NVIDIA and China goes well beyond that recent incident. What investors may or may not know is that this connection goes back over eight years.
That鈥檚 right, since 2017, according to an initial public offering , NVIDIA has been a partner with another Chinese company, , which focuses on the with a particular interest in autonomous driving and logistics. Whether this relationship has anything to do with today鈥檚 chipmaking rivalry between the United States and China is up for debate. However, there are other angles that can be taken from this relationship.
For example, China is leading the way in global electric vehicle demand, which, according to the latest research done by , now represents . With this in mind, the partnership between NVIDIA and WeRide can be taken as a potential backdoor strategy to supply China with the chips it needs to make autonomous driving a reality.
Not a Recent Collaboration
While WeRide stock surged over 63% in a single day following the news, NVIDIA鈥檚 investment in the company wasn鈥檛 recent. The stock is up so much because, as WeRide has just gone public in the fourth quarter of 2024, the information behind NVIDIA鈥檚 holdings is now becoming mainstream.
This might have been taken as a misrepresentation of a recent purchase. However, it merits some bullishness in WeRide nonetheless since one of America鈥檚 largest companies in the should have a very strong reason to partner with WeRide in the first place.
According to WeRide’s IPO prospectus, this investment involves NVIDIA providing the graphic processing units (GPUs) needed for WeRide to develop its autonomous driving and logistics fleet according to its demand and needs projections. In return, NVIDIA would share in the success by being an equity stakeholder.
Now, most of these shares held by NVIDIA in WeRide are still in what鈥檚 called a 鈥渓ock-up period,鈥 meaning that NVIDIA cannot dispose of them until the period ends, considering they were pre-IPO shares. With this in mind, there are a few things to consider moving forward for NVIDIA shareholders and for those feeling like they鈥檙e missing out on WeRide.
The Market鈥檚 Take on News
What investors need to focus on now is the impact that this sudden spike in valuation for WeRide might have on NVIDIA, especially as the company is getting ready to report its latest quarterly earnings results. First is the fact that over $4 billion in market capitalization has been created for NVIDIA鈥檚 balance sheet.
Second, the stock’s potential to keep moving higher would only add more value to NVIDIA. According to accounting standards, this could be taken as 鈥淥ther income鈥 if NVIDIA chooses to report this increase in valuation from equity holdings that way, meaning that earnings per share (EPS) could come out better than expected.
This is, of course, why the stock was up over 1.7% the same day WeRide spiked and why the market is still willing to pay such massive premiums for NVIDIA. Not only does NVIDIA trade at today, but the market is willing to pay a 32.7x forward price-to-earnings (P/E) valuation for it.
Compared to peers like , which trades at only 23.8x forward P/E, this premium shows investors the market鈥檚 willingness to overpay for NVIDIA鈥檚 future earnings. When the market shows this high level of conviction, investors would be best served by not fighting against it.
More than that, some Wall Street analysts, such as those from Tigress Financial, have reiterated their bullish outlook for NVIDIA ahead of its earnings announcement. These analysts not only kept a Strong Buy rating on NVIDIA stock but also placed a on the company, which calls for up to 60.3% upside from today鈥檚 price.
Ultimately, what matters is whether the market will be right to pay such a high premium for NVIDIA鈥檚 future earnings. Considering Wall Street earnings per share of 2025, which land at $3.28, a fourfold increase in the stock鈥檚 EPS indeed seems to justify today鈥檚 premiums, which are only expanded by this boost in WeRide鈥檚 valuations.
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The market鈥檚 memory is still fresh when it comes to the volatility induced by the聽 flash sell-off that came from the . However, the relationship between NVIDIA and China goes well beyond that recent incident. What investors may or may not know is that this connection goes back over eight years.
That鈥檚 right, since 2017, according to an initial public offering , NVIDIA has been a partner with another Chinese company, , which focuses on the with a particular interest in autonomous driving and logistics. Whether this relationship has anything to do with today鈥檚 chipmaking rivalry between the United States and China is up for debate. However, there are other angles that can be taken from this relationship.
For example, China is leading the way in global electric vehicle demand, which, according to the latest research done by , now represents . With this in mind, the partnership between NVIDIA and WeRide can be taken as a potential backdoor strategy to supply China with the chips it needs to make autonomous driving a reality.
