Key Points

While Nvidia focuses mainly on chip design and AI infrastructure, it also channels capital into select public and private firms.
Most investments target partners such as suppliers and customers.
Following these moves reveals Nvidia's perspective on key segments of the AI landscape.
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Investors recognize Nvidia (NASDAQ: NVDA) as the leading chip designer powering the artificial intelligence boom, yet the company also holds stakes in other businesses, including several publicly traded ones.

These holdings usually involve AI-related firms that serve as partners, suppliers, or customers.

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Nvidia's overall investment holdings reached nearly $18.4 billion by the close of the first quarter. In that period the company directed $3.8 billion into two AI-related stocks, adding to an existing holding and establishing one new position.

Image source: Nvidia.

Increasing exposure to CoreWeave

During the quarter Nvidia raised its ownership in AI data center operator CoreWeave (NASDAQ: CRWV) by 95 percent. The added value exceeded $1.9 billion, lifting the total stake above $3.65 billion.

Nvidia and CoreWeave maintain a long-standing collaboration in which CoreWeave buys graphics processing units from Nvidia and uses them in data centers to supply compute capacity for AI workloads.

In January the partners expanded their agreement to help CoreWeave develop more than 5 gigawatts of AI data centers by 2030. Expanding data center capacity supports the broader AI transition, aligning with Nvidia's strategic interests.

Alongside the announcement Nvidia disclosed a $2 billion purchase of CoreWeave Class A shares at an average price of $87.20 each. The stake now exceeds 47 million shares, representing roughly 9 percent of the company.

Although CoreWeave ranks among larger data center providers and stands to gain while AI demand stays robust, its balance sheet raises concerns. Data center construction requires heavy capital outlays, and CoreWeave carries substantial leverage. Shareholder equity has been meaningfully diluted.

At the end of the first quarter CoreWeave reported a total debt-to-equity ratio of 5.2, indicating elevated default risk. Its total liabilities-to-equity ratio reached 10.6, underscoring significant overall leverage.

The share count has more than doubled in the past year through multiple private placements, many involving convertible notes that may convert into equity.

These balance sheet factors and rising competition in the sector temper enthusiasm for CoreWeave. Should the AI investment theme weaken, the company could face notable pressure.

Forming a fresh alliance

In March Nvidia unveiled a new collaboration with Coherent (NYSE: COHR). Coherent specializes in photonics and supplies lasers and optical transceivers that play a growing role in AI infrastructure.

The non-exclusive pact includes a multibillion-dollar purchase commitment from Nvidia along with future access and capacity rights to Coherent's advanced laser and optical networking products. Nvidia also committed $2 billion to support research and development efforts.

Coherent components have gained importance for Nvidia as data centers expand to thousands of GPUs that demand greater data movement among processors before information reaches the chips.

Nvidia specifically incorporates Coherent silicon photonics into Spectrum-X switches. These Ethernet networking platforms support construction of multi-tenant hyperscale AI clouds.

Coherent occupies a position comparable to Micron. Although Micron supplies memory that resides on GPUs, both firms serve as essential links in the AI supply chain as the industry grows.

Coherent shares have surged nearly 370 percent over the past year. The stock trades near 70 times forward earnings yet appears more reasonable at 10.5 times forward revenue.

Like many AI-related names, Coherent will likely track the broader AI investment cycle, though current conditions appear favorable. A modest initial position may suit investors, with additions considered during pullbacks or through gradual dollar-cost averaging.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coherent, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.