Why Recursion Pharmaceuticals Stock Is Soaring Today

Shares of Recursion Pharmaceuticals (NASDAQ: RXRX) had soared by 15.8% as of 12:06 p.m. ET on Friday. Did the clinical-stage biotech company report great news? Nope. Instead, the stock's gains appeared to be driven by moves made by Nvidia (NASDAQ: NVDA).

The giant chipmaker disclosed its own holdings in other publicly traded companies in a filing to the U.S. Securities and Exchange Commission on Friday. That filing revealed that during the fourth quarter, it had exited its positions in several artificial intelligence (AI) stocks, notably including Soundhound AI, and reduced its positions in others. However, Nvidia held onto all 7.7 million or so of its Recursion Pharmaceuticals shares.

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A vote of confidence in Recursion?

Many investors seemed to view Nvidia's decision to maintain its stake in Recursion as a vote of confidence in the company. Recursion uses AI extensively as part of its drug discovery process, and built the largest supercomputer in the biopharmaceutical industry with Nvidia's help.

Had Nvidia added to its stake in Recursion, it would have been a clear sign it believed in the small drugmaker's potential. But that didn't happen. Still, the fact that Nvidia hung onto its Recursion shares while selling other AI stocks hand over fist is understandably reassuring to Recursion shareholders.

Is Recursion Pharmaceuticals stock a buy?

Does any of this change the premise for buying Recursion Pharmaceuticals stock? Not really. The company's technology is promising. However, its experimental drugs are also still in the early stages of testing. Risk-averse investors will be better off going with other stocks. This biotech stock could be a big winner over time, though, for aggressive investors with enough patience to wait for its pipeline programs to advance.

Should you invest $1,000 in Recursion Pharmaceuticals right now?

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Keith Speights 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.