Regarding artificial intelligence (AI), NVIDIA (NASDAQ: NVDA)and more. The chipmaker has become the poster child for AI, with its graphics processing units (GPUs) becoming the gold standard for AI systems, so when Nvidia invests in anything AI-related, investors take notice.
This happened earlier this year. SoundHound AIIn February, investors learned that Nvidia had made a small investment in a voice-recognition specialist, and the company’s shares rose 93% in the week after the announcement.
Now history is repeating itself. Last month, NVIDIA Servo Robotics (NASDAQ: SERV)shares have risen into the stratosphere. Let’s take a look at why NVIDIA invested in the company and whether it makes sense for investors.
Serve hot.
Saab Robotics describes itself as “the leading autonomous curbside delivery company.” The company went public without much fanfare on April 18, offering 10 million common shares at $4 each. The stock initially flew under the radar and interest was low, causing it to close its first day of trading down 22%.
The company is focused on using robots and drones for last-mile delivery, a market that management sees as $450 billion. For example, the company estimates that the average distance for a food delivery in the U.S. is 2.5 miles. What’s more, it claims that the average cost of covering that distance using an autonomous robot would be about $1, far cheaper than existing alternatives and would also reduce greenhouse gas emissions from cars.
Serve first launched its fleet of sidewalk delivery robots in Los Angeles in 2020. By the end of the year, these robots will be available to customers of food delivery service Postmates, now known as Uber Technologies.
Uber has a commercial partnership agreement with Serve to deploy up to 2,000 delivery robots by 2025, up from Serve’s current fleet of about 100. The expansion will see at least 250 robots in Los Angeles by the first quarter of 2025, with rollout to new geographic markets starting in the second quarter.
Nvidia isn’t alone
In a regulatory filing on July 18, Nvidia disclosed that it owned more than 3.7 million shares of Serve Robotics, representing a 10% stake in the company that was valued at about $10 million at the time. Rumors of Nvidia’s investment have stoked interest in the small company, sending its shares up 335% (as of Thursday’s market close). But several developments in recent weeks have further excited investors, and they’re not just about Nvidia.
This week, the serve Shake Shack The company delivers food orders through Uber Eats in Los Angeles. Landing a deal with a well-known fast-casual chain like Shake Shack was a big win for Serve and raised the company’s profile in the food delivery space.
The announcement comes on the heels of better-than-expected second-quarter financial results for Saab Robotics, which reported $470,000 in revenue, including $300,000 from auto parts suppliers. Magna We licensed robotics technology. Delivery revenue was $170,000, up 178% year over year and 80% quarter over quarter. At the same time, gross profit for this division increased 85% year over year and 64% quarter over quarter.
Driving the financial results were strong operational performance. Serve’s average daily delivery hours were 385 hours during the quarter, up 106% year-over-year and 28% quarter-over-quarter. The company also grew the number of robots in operation each day by 85% year-over-year and 23% quarter-over-quarter.
Should investors follow Nvidia’s lead?
NVIDIA’s investment in Serve Robotics is noteworthy, but it needs to be viewed objectively. As of the end of the second quarter, Serve represented less than 2% of NVIDIA’s AI-focused portfolio. For reference, chipmaker Arm Holdings This accounted for approximately 82%.
With a market cap of about $422 million, Serve Robotics is barely at small-cap level and has yet to turn a profit. This makes the company’s stock extremely volatile and much riskier than investing in Nvidia. There are also valuation issues, with Serve shares currently selling for 259 times forward sales. For comparison, Nvidia sells for 25 times forward sales, making it a bargain given its triple-digit growth rate.
Investors Really Companies wanting shares in Serve Robotics should buy only a small percentage of the stock to justify such a risky bet. Better yet, just buy Nvidia and own Serve by proxy.
Should you invest $1,000 in Serve Robotics right now?
Before buying Serve Robotics shares, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks These are the stocks investors should buy right now… and Serve Robotics wasn’t among them. The 10 selected stocks have the potential to generate big gains over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That comes to $763,374.!*
Stock Advisor With portfolio construction guidance, regular updates from our analysts, and two new stock picks every month, we provide investors with an easy-to-follow blueprint for success. Stock Advisor The service is More than 4 times First S&P 500 recovery since 2002*.
View 10 stocks »
*Stock Advisor returns as of August 12, 2024
Danny Vena invests in Nvidia. The Motley Fool invests in and recommends Nvidia and Uber Technologies. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.
The post See the latest artificial intelligence (AI) stocks in Nvidia’s portfolio (hint: it’s not SoundHound AI) was originally published by The Motley Fool.
