The artificial intelligence (AI) trade has been blistering higher, but Wednesday featured an interesting surge. That’s as shares of Recursion Pharmaceuticals (NASDAQ:RXRX) are exploding higher on the day. In fact, RXRX stock is currently up about 17% so far in the session.
So what does a $3 billion biotech company have to do with artificial intelligence? And what does Nvidia (NASDAQ:NVDA) have to do with it?
First, let’s back up.
NVDA shares were rocked during the 2022 bear market, losing about two-thirds of their value. While the rebound was a bit rocky at first, the stock really found its stride in 2023. For the year, shares have more than tripled, rallying 221%.
Driving those gains have been Nvidia’s advances in AI technology. Despite sporting huge gains going into its earnings report in late May, the firm delivered robust guidance well in excess of what analysts were expecting.
This has led to many other AI stocks — like C3.ai (NYSE:AI), Upstart (NASDAQ:UPST) and Broadcom (NASDAQ:AVGO), among many others — to explode higher too. And now, we can put Recursion on that list too.
RXRX Stock Rips on Nvidia Investment
Shares of RXRX rallied more than 75% on Wednesday, July 12. At one point, the stock traded as high as $14.99, up 121% on the day. Now trading above that level — and up in five of the last six sessions — the bulls have been in control of Recursion shares.
All of this stems from a $50 million investment made by Nvidia, “which was implemented as a private investment in public equity.”
“Recursion will utilize NVDA’s cloud platform to train its AI models using its over 23 petabytes of biological and chemical dataset…
RXRX said it could potentially use its BioNeMo platform to commercially license or release its AI models.”
The move on July 12 triggered more than 80 million shares of RXRX stock to trade that day. In fact, four of the last six sessions have resulted in a volume that would have exceeded the previous one-day record.
Depending on investors’ data source, the short interest in RXRX is anywhere from 12.5% to 16.3%. Further, the stock did trade a fair amount of short volume on July 12.
Luckily for the bears, this stock doesn’t have a huge short interest — although it is notable — which would have likely triggered a massive upside move. However, bulls are wondering if there’s enough fuel left in the tank to continue to squeeze this one higher.
The longer it stays above $15 — and thus, the July 12 high of $14.99 — then the more potential it has to run. Lastly, if the AI trade catches another wave of momentum, then Recursion stock seems likely to participate.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
