Is Recursion Pharmaceuticals (RXRX) Nvidia's Key AI Biotech Stake a Buy Amid Innovation Surge?

Recursion Pharmaceuticals (NASDAQ:RXRX) stock is one of those lesser-known mid-cap biotech plays that investors may be interested in buying on weakness, primarily because of its dealings with the great GPU kingpin Nvidia (NASDAQ:NVDA). Just because Nvidia owns a small stake in a company, though, does not mean it’s destined for impressive returns over the near- or medium-term.

Indeed, Nvidia tends to play the long game with its investments. And when it comes to Recursion, those looking for a swift profit may be left disappointed, especially as the AI-driven biotech innovator continues to battle through some fairly harsh macro headwinds. Indeed, the Trump administration has made things quite volatile in the healthcare sector. Combined with a lack of profitability and a pipeline that’s quite heavily leaning towards the early stages and RXRX, though incredibly intriguing, looks to be more of a less timely stock to go after.

Though I’m enticed by the AI-driven potential, I view Recursion as one of the smaller biotech firms that still needs to do a bit more to prove itself to be worthy of investment dollars, especially amid rising competition. Sure, Recursion’s Nvidia partnership is a win. But as more big-tech firms team up with a growing batch of smaller, fast-rising biotechs to discover the potential in AI-assisted drug discovery and all the sort, I think it’ll prove difficult to stick with one single name with the assumption it’ll reap a lion’s share of the profits as applied AI really takes the world of biotech innovation to new heights.

Is Recursion Pharma a buy because of Nvidia’s endorsement?

Indeed, Nvidia’s bet on Recursion is notable, but despite the stake and collaboration, the name isn’t without its fair share of risks. As mentioned previously, the early-stage pipeline could take a lot of time to develop. And in the meantime, the firm could find itself pouring tons of cash into R&D, with less to show for it. Of course, strategic partnerships aren’t to be ignored, but, at the end of the day, it’s hard to tell what the drug pipeline will yield and when such a drug will nudge the firm towards profitability. 

Is AI-driven biotech the way of the future? Most definitely. But I’m not so sure if Recursion is a name that will stand above the pack. Of course, time will tell if RXRX shares represent another big win for Nvidia. Perhaps M&A could be the way to go as Recursion looks to add to its impressive arsenal of AI-first biotech. The latest purchase of Rallybio’s REV102 drug is intriguing, but time will tell how the asset fits into the RXRX puzzle. 

Though AI-driven drug discovery is exciting, I think the field is too nascent to be able to call a winner. Personally, I’d be more interested in buying RXRX stock on strength than weakness. With a $2.3 billion market cap, RXRX is still flying under the radar of most investors. If the Recursion OS 2.0 platform and virtual cell models start gaining momentum, perhaps it’ll be time to punch a ticket. Until then, there’s no rush into the name as it struggles to find direction at $5 and change per share.

The bottom line on RXRX stock

In short, RXRX, while intriguing, seems like more of a wait-and-see kind of name than a buy. Just because you’ve made money in Nvidia doesn’t mean you will in this up-and-coming biotech innovator.