Missed Nvidia? Could IP Group shares be next?


A pastel colored growing graph with rising rocket.

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IP Group (LSE:IPO) shares pushed down last week after the company reported its earnings for the first half of the year. The Oxford-based intellectual property commercialisation firm reported a decline in its net asset value per share, while pre-tax losses narrowed.

So, why do I think this loss-making British firm could experience Nvidia-like growth? Let’s take a look.

What does it do?

IP Group is a British venture capital company that invests in early-stage technology companies, notably those involved in the development of innovative technologies and solutions. The company supports start-ups and emerging companies providing them with access to capital and expertise to nurture their growth and success.

It has a diverse portfolio of investments across various industries, including several in the field of artificial intelligence (AI). These investments include companies like DeepMatter, Rio AI, and Lumai.

Of course, while innovation is always synonymous with growth, it’s also synonymous with risk. This risk is particularly prevalent in this challenging period for start-ups, characterised by slow economic growth and high borrowing costs.

Investments

IP is a medium-sized company — with a market cap of £593m — and it invests in smaller companies. As such, the share price can be volatile. Over the past 12 months, 30% has been wiped off the value of this publicly-listed venture capitalist. However, if the companies it invests in do well, the potential for share price growth is considerable.

Once-listed DeepMatter is one of its most exciting AI investments. The company develops AI-powered software for the life sciences industry. The software is used to analyse images and data from microscopes, making it easier for scientists to make new discoveries.

Meanwhile, Lumai, a pioneering British deep optics company, is a new addition to the portfolio. It focuses on developing cutting-edge technology for optical computing. Unlike conventional computing methods that rely on electricity, Lumai’s approach leverages light to perform computations.

The company, which has strategic partnerships with institutions such as the Universities of Oxford and Cambridge, has immense potential to revolutionise computing as we know it, resulting in faster, more energy-efficient, and highly secure computers. While it’s very early days for this next-gen AI firm, it received a significant boost in 2020 with a £1.1m UK govt grant.

Hedging

Here’s why I’m looking to invest in IP Group. The thing is, many growth or AI stocks will fail, even if they’re listed. And because I don’t have the financial or research scope of an investment fund, certainly when it comes to privately held companies, it makes sense to hedge my bets and invest in IP Group.

Sure, many of its investments will fail. But it’s investing in a high-potential sector and some will flourish! And if they really flourish, it could send IP Group stock soaring.



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