Might Robotics Technology Potentially Emerge as the New Nvidia?
NVIDIA's (NVDA, down by 2.69%) stock saw a massive surge of 2,630% over the past five years, increasing its market cap to approximately $3.5 trillion and securing the title of the world's most valuable company. This skyrocket was primarily due to its robust sales of AI-centric GPUs for data centers.
Between fiscal 2019 and fiscal 2024 (concluding in January), NVIDIA reported a compound annual growth rate (CAGR) of 39%. However, analysts predict that its revenue will grow at an even faster CAGR of 53% from fiscal 2024 to fiscal 2027 as the AI market continues to expand.
This long-term investment potential makes NVIDIA an attractive choice, yet it may face challenges in recreating its previous millionaire-making gains. For those searching for the "next NVIDIA," the smaller AI companies NVIDIA is backing could be worth exploring.
One such company that stands out is SERVE Robotics (SERV, up by 14.69%), a manufacturer of AI-driven sidewalk delivery robots. The question remains: could this relatively small $384 million company eventually evolve into a tech titan like NVIDIA?
A minor player in an emerging market
Founded in 2017 within Postmates, which Uber Technologies (UBER, down by 1.19%) acquired and integrated into Uber Eats in 2020, SERVE Robotics split off as an independent company in 2021. Despite this, Uber continued using its delivery robots in select Los Angeles areas. The newest Gen 3 robots boast a 48-mile range on a single charge, can carry up to 15 gallons of cargo, and have a top speed of 11 mph, with resistance to extreme temperatures and heavy rain.
SERVE Robotics carried out a reverse merger with the SPAC Patricia Acquisition in 2023, eventually listing on the Nasdaq at $4 a share on April 18. Despite a pleasing opening, the share price dropped to $3.11 by the end of its first month.
Currently, Serve's stock is trading at around $9, largely due to NVIDIA revealing its 10% stake in the company in July. Despite generating minimal revenue, this endorsement has attracted numerous optimistic investors.
How much larger can SERVE Robotics grow?
SERVE Robotics operates 100 robots, with only 59 active ones serving Uber Eats in the Los Angeles area during the third quarter of 2024. Revenue for the first nine months of 2024 amounted to $1.6 million, accompanied by a net loss of $26.1 million.
Projected revenue for the full year is predicted to reach $1.9 million with a net loss of $34.3 million. With an enterprise value of $384 million, the company appears substantially overvalued at more than 200 times this year's sales. However, SERVE aims to deploy up to 2,000 robots for Uber Eats across the Los Angeles and Dallas-Fort Worth metro areas in 2025.
Assuming this ambitious target is achieved, analysts expect its revenue to surge to $13.3 million in 2025 and $59.5 million in 2026, making SERVE moderately priced at about 6.5 times 2026 sales.
If SERVE manages to expand its autonomous delivery robot fleet for Uber Eats, it could attract the interest of other delivery-focused companies, diminishing its reliance on Uber and accelerating its long-term growth.
According to Precedence Research, the global delivery robot market is projected to increase at a CAGR of 32% from 2024 to 2034. This growth could be attributable to labor shortages, the rise of e-commerce, and the development of more efficient autonomous robots. These robots could also serve as a safer, less expensive, and more reliable alternative to human drivers for last-mile deliveries. Consequently, if the company manages to break out of its niche, it may deliver substantial long-term returns.
But can SERVE Robotics become the next NVIDIA?
SERVE might have a promising future, yet it remains unclear if it can raise its production, attract additional customers, and diversify its business by offering various sorts of autonomous robots. Therefore, while the company isn't entirely like NVIDIA just yet, its potential is evident, earning NVIDIA's investment interest. Investors searching for a high-risk, high-reward play in the booming AI market could consider emulating NVIDIA's strategy.
Investors looking to replicate NVIDIA's success in the AI market might find potential in companies like SERVE Robotics. Given NVIDIA's 10% stake in SERVE, it shows faith in the company's future growth.
As the global delivery robot market is projected to expand at a CAGR of 32% from 2024 to 2034, SERVE Robotics could see substantial long-term growth if it successfully diversifies its business and attracts additional customers. However, becoming the next NVIDIA is a significant leap and relies on SERVE's ability to innovate beyond its current focus on autonomous delivery robots.
