Title: What's Drawing Nvidia and Uber to This Petite $400 Million AI Firm?
Nvidia (-0.02%) and Uber Technologies (-1.88%) might seem like unrelated tech giants, but they share a common interest in the future of transportation and logistics. Uber, with its massive ride-hailing and food delivery services, is venturing into autonomous driving platforms, aiming to reduce reliance on human drivers. Similarly, Nvidia, a leading supplier of high-end GPUs, has developed its own autonomous driving platform.
Uber's passion for autonomous driving brought it to Serve Robotics, a $500 million company specializing in autonomous delivery robots. Serve's innovative robots, powered by advanced AI and Nvidia's technology, have been receiving support from both tech titans. Together, they own over 20% of Serve's outstanding shares, showing their confidence in its potential.
The Future of Last-Mile Delivery with Serve Robotics
The current last-mile delivery system, including platforms like Uber Eats and DoorDash, can be significantly more efficient with the help of serpentine two-ton cars. Enter the stage: Serve's autonomous delivery robots.
As hardware and software associated with AI and autonomy's development costs decrease, robots and drones are becoming financially viable options. Serve, with its level 4 autonomous robots, has made a promising start in Los Angeles. Its latest Gen3 robot, powered by Nvidia's Jetson Orin technology, is five times more powerful and cost-effective than its predecessors.
Uber is working to deploy 2,000 of these advanced robots across California and Texas by 2025, a move that can save the company on human delivery driver expenses. Serve's robots' reliability has been twice as high as human drivers with up to 99.94% reliability in 50,000+ orders.
Serve Robotics: The Rapidly Growing, Loss-making Venture
Third-quarter revenue for Serve Robotics surged by 254% over Q3 2023, reaching $221,555, before plunging by over 50% when its revenue from Magna International dried up. Despite this shift, Serve remains in its growth phase, bleeding money in the process due to its substantial research and development expenses.
With $8.3 million in operating expenses during Q3, Serve was left with an $8 million net loss, taking its year-to-date loss to $26.1 million. Its cash reserves, though substantial at $50.9 million, might not last long if the company continues to burn cash at its current pace. Serve's new at-the-market stock offering facility can potentially raise an additional $100 million, but this move could significantly dilute existing investors.
A Shared Investment with Nvidia and Uber
Serve spun off from Postmates, which Uber acquired, in 2021. Uber still holds the largest stake at 12%, whereas Nvidia has invested in Serve since 2022, presently owning an 8% share. If Serve continues issuing shares, the two companies might need to participate in every future capital raise if they wish to protect their interests. However, with Serve's staggering $196 P/S ratio, investing more might not be the best choice, especially given the company's growth potential.
Serve's revenue forecasts suggest future growth potential, even if it remains expensive compared to similar companies like Nvidia. But with an estimated opportunity in the robot and drone delivery industry worth $450 billion by 2030, a modest investment could yield significant returns in time, assuming Serve's autonomous delivery robots succeed in revolutionizing last-mile logistics.
Despite their significant investments in Serve Robotics, both Uber and Nvidia are closely monitoring its financial situation, as the company continues to operate at a loss. With its ambitious growth plans and high cash burn rate, finding a balance between funding R&D and preserving cash reserves is crucial for Serve's long-term success in money management and investing in its future.
As Serve Robotics and its autonomous delivery robots show promising results in increasing efficiency and reducing delivery costs, finance experts are keenly watching how Nvidia and Uber will strategize their investments, aiming to maximize returns while minimizing financial risks.
