Nvidia's Strategic AI Investments
When it comes to artificial intelligence (AI), Nvidia is a name synonymous with excellence. Known for their cutting-edge graphics processing units (GPUs), Nvidia has set a benchmark for AI systems. Whenever Nvidia invests in AI-related ventures, it captures the attention of investors and the tech world alike.
Earlier this year, Nvidia's investment in SoundHound AI, a company specializing in voice and audio recognition, caused a significant stir. Following the announcement, SoundHound AI's shares soared, gaining as much as 93% in just one week. This scenario has recently repeated with Nvidia's latest acquisition of a stake in Serve Robotics.
Serve Robotics: The Autonomous Delivery Pioneer
Serve Robotics describes itself as a pioneering company in "autonomous sidewalk delivery." On April 18, Serve Robotics went public, offering 10 million shares at $4 each. Initially, the company flew under the radar, with weak interest leading to a 22% drop on its first trading day.
The company targets a massive potential market estimated at $450 billion, by leveraging robotics and drones for last-mile delivery. To put it simply, Serve Robotics aims to transform how food and goods are delivered over short distances (like 2.5 miles) using autonomous robots. This method is not only cost-effective—estimated at just $1 per delivery—but also environmentally friendly, reducing emissions compared to traditional vehicle deliveries.
Launched in Los Angeles in 2020, Serve's robots have completed over 10,000 deliveries for Postmates, now owned by Uber Technologies. Serve's partnership with Uber aims to expand this fleet to 2,000 robots by 2025, with a significant presence in Los Angeles by early 2025, and plans to venture into new markets by mid-year.
Nvidia's Investment and Market Impact
In a regulatory filing dated July 18, Nvidia disclosed owning more than 3.7 million Serve Robotics shares, representing a 10% stake valued at $10 million. This announcement resulted in Serve's shares skyrocketing by 335%. However, it's not just Nvidia's backing driving interest.
Recently, Serve Robotics partnered with Shake Shack to deliver food via Uber Eats in Los Angeles. This collaboration with a renowned fast-casual chain has significantly boosted Serve's profile in the food delivery sector.
Financial Performance and Future Prospects
Serve Robotics reported impressive second-quarter financial results, with revenue reaching $470,000. This included $300,000 from Magna for licensing its robotic tech. Delivery revenue alone increased by 178% year over year. The company's gross margin also improved significantly.
Operationally, Serve averaged 385 daily supply hours, a 106% increase from the previous year. Its daily active robots grew by 85% year over year.
Investment Insights
While Nvidia's stake is prominent, it constitutes less than 2% of Nvidia's AI-focused portfolio, overshadowed by larger holdings like Arm Holdings. With a market cap of approximately $422 million, Serve Robotics is considered a small-cap company, yet to record a profit. As such, its stock is volatile and riskier compared to investing in Nvidia, especially given its high valuation at 259 times forward sales.
Investors intrigued by Serve Robotics should consider it a high-risk investment, suitable only for small stakes. Alternatively, investing in Nvidia provides indirect exposure to Serve, balanced by Nvidia's wider and more robust portfolio.
