Why Is NVIDIA Backing a Tiny Robotics Firm?

NVIDIA gets a lot of attention for designing some of the world’s most powerful GPUs. It’s difficult to imagine that the recent advancements in artificial intelligence would have happened without NVIDIA. After all, OpenAI trained ChatGPT with 10,000 NVIDIA GPUs connected to a Microsoft supercomputer.

But NVIDIA actually does much more than build efficient processing units. In 2017, it started partnering with a Chinese company to develop autonomous vehicles.

Today, NVIDIA takes a holistic approach to improving self-driving technology that includes using the NVIDIA DGX platform to train AI models for driving scenarios, simulating real-world environments with the NVIDIA Omniverse and NVIDIA OVX, and integrating the NVIDIA DRIVE AGX into vehicles so they can make safe decisions in real time.

The growing interest in autonomous vehicles helps explain why NVIDIA backs Serve Robotics (SERV).

The Mission of Serve Robotics

Serve Robotics wants to use AI-powered, low-emission robots to complete last-mile deliveries. Its delivery robots are small enough that they travel on sidewalks instead of driving on streets.

If you live in L.A., you might have already seen the robots delivering food for Uber Eats, which is currently Serve Robotics’ largest investor.

Uber Eats and Serve Robotics have plans to increase their reach throughout California before moving into some of the largest cities in Texas. Eventually, the small robots could replace the human drivers that make up much of Uber Eats’ workforce.

Serve Robotics puts it simply when it asks, “Why deliver 2-pound burritos in 2-ton cars?” Relying on larger vehicles to deliver food creates unnecessary traffic and emissions. NVIDIA and Uber have taken notice, and they’re contributing to the company’s growth.

So far, the company has completed over 50,000 deliveries in L.A. with 99.94% accuracy. Serve says Uber drivers are much less reliable. According to the robotics company, its autonomous delivery vehicles are 10 times more reliable.

Serve Robotics Financials: Troubling or Exciting?

Serve Robotics has useful technology, but it also has plenty of hurdles to overcome before finding long-term success.

Serve Robotics struggles to generate revenue. Last year, Serve Robotics earned money through a partnership with Magna International, a major supplier for the automotive industry. The partnership gave Magna access to Serve’s technology in exchange for a fee. That helped push Serve’s 2024 Q2 revenues to $468,375. When the contract ended, Serve lost that source of revenue, which is obvious in the Q3 report that shows just $221,555 in revenue.

OK, so Serve isn’t making much revenue. That might not matter much as long as it isn’t losing money. Unfortunately, its year-to-date net loss exceeds #26.1 million for 2024.

To some extent, none of this is surprising. Startups typically rely on investors as they improve their technologies and start building lucrative partnerships. No one expects them to profit at this stage. Still, it’s concerning that Serve Robotics only has less than $51 million in cash on hand, an amount that will only cover its expenses for about 18 months.

This looks like bad news, yet NVIDIA continues to pour money into Serve. Does the global technology leader see an opportunity other investors miss?

NVIDIA’s Ongoing Investment in Serve

NVIDIA first invested in Serve Robotics in 2022. By last summer, NVIDIA had poured over $12 million into Serve. It currently owns about 8% of the company. Uber owns 12%.

Maybe $12 million doesn’t seem like a huge amount for NVIDIA, which has a $3.411 trillion market cap. However, it’s important to look at NVIDIA’s investment as more than money. It’s a tech partnership that could drive growth for both companies.

By partnering with NVIDIA, Serve gains access to Jetson Orin technology that could reduce operating costs by 50% by increasing top speeds, growing run times, and giving vehicles wider ranges. In exchange, NVIDIA gets to invest in a small company with amazing growth potential.

NVIDIA could also benefit from innovations the smaller company develops as it solves real-world AI problems. It’s easy to compare the Serve investment to NVIDIA’s interest in SoundHound AI. Granted, SoundHound AI has more impressive financials at this point (although its operating costs have soared nearly as fast as its growth).

The key here isn’t whether NVIDIA earns short-term gains from these investments. The point is that NVIDIA can use investing as a way to outsource AI technology development to much smaller companies that focus on solving niche problems.

Should You Follow NVIDIA’s Investment in Serve Robotics?

There are a lot of things to consider before investing in Serve Robotics. Interest from NVIDIA and Uber has convinced a lot of investors to gamble on the company, and that pushed stock prices up. Last summer, the stock price jumped from about $2.30 to nearly $20 within less than a month. Since then, though, the price has stabilized a bit. 

If NVIDIA decides to invest more money next year, expect the stock’s price to jump again and create a significant opportunity for anyone holding shares. If you’re willing to take a risk, getting in now before companies like NVIDIA and Uber give Serve even more money is a viable option.

And Serve does have the potential to start making more money very soon. Deploying 2,000 robots by the end of 2025 is very likely to help the company generate up to $13.3 million in revenue. Compared to this year, that would mean Serve grows by 600%. Whether its stock price will follow that upward trend is unknown, but there’s a lot of hope there.

Cautious investors can still choose NVIDIA, although there’s certainly some anxiety there, too, as the incoming Trump administration promises to levy high tariffs on imports.

When you look at their price-sales ratio, Serve Robotics looks like an outrageous gamble. From that perspective, it’s about six times as expensive to invest in Serve than NVIDIA. Of course, you will spend fewer dollars buying SERV shares, but the point stands.

So, should you buy SERV? The relatively low price and high potential make Serve look like an exciting opportunity to investors who can stand the volatility that is likely to follow. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.