Serve Robotics is small but growing very quickly.
Nvidia (NVDA -1.81%) is a leading supplier of high-end graphics processing units (GPUs) for data centers. GPUs are used to power and train artificial intelligence (AI) applications. Uber Technologies (Uber 1.32%) operates Uber Eats, the world’s largest ride-hailing platform and food delivery service.
What do these two industry leaders have in common? Uber is partnering with 14 companies to develop self-driving platforms as the mobility industry looks to transition away from human drivers. Technologies such as self-driving and robotics are powered by AI, and Nvidia has also developed its own self-driving platform.
This may explain why both Nvidia and Uber support Serve Robotics (service 23.82%)a company with a market capitalization of $500 million that has developed autonomous delivery robots. The pair own more than 20% of Saab’s outstanding shares, suggesting they are bullish on the company’s prospects. If you’re considering following them and getting into stocks, here’s what you need to know.
Image source: Getty Images.
Delivery robots could be the future of last-mile logistics
Existing last mile delivery solutions are highly inefficient. Platforms like Uber Eats and DoorDash typically rely on people using cars to deliver food and other goods to customers. In a presentation last month, Serve Robotics asked some thoughtful questions: Why transport a 2 pound burrito in a 2 ton car?
Robots and drones may be a better solution. Saab says robots are becoming an economical option with each passing day, as the costs of hardware and software associated with the development of AI and autonomy are rapidly decreasing. In fact, Saab predicts that as adoption of its robots grows and its business grows, it will eventually be able to operate its robots for as little as $1 per delivery.
Serve’s robots use Level 4 autonomy, allowing them to navigate sidewalks within designated areas without the need for human intervention. Since early 2022, the company’s robots have delivered more than 50,000 orders on behalf of more than 400 restaurants across Los Angeles, with up to 99.94% reliability. According to Serve, this makes the robot 10 times more reliable than a human driver.
The company’s latest Gen3 robot is the smartest and fastest yet, with a top speed of 11 miles per hour. Thanks to Nvidia’s Jetson Orin technology, which includes the hardware and software needed for advanced robotics and computer vision, Gen3 is five times more powerful than Serve’s previous generation robots. It features higher top speeds, extended range and longer uptime, which together reduce operating costs by 50%.
Under the deal with Uber, Saab is working to deploy 2,000 new robots by the end of 2025, allowing it to expand into other parts of California as well as Dallas and Fort Worth, Texas. It will be. If the program is successful, it would also benefit Uber, as the company could reduce its use of human delivery drivers and save money.
Serve generates little revenue but is growing rapidly
In the third quarter, Serve generated just $221,555 in revenue, which was a 254% increase compared to the same quarter in 2023. Meanwhile, this number was down by more than half compared to the second quarter of 2024, when revenue was $468,375.
The reason for the decrease is that Serve realized its final service revenue from Magna International during the second quarter. Magna is a $13 billion parts supplier to the auto industry and the manufacturing partner for Serve’s 2,000 new robots that I mentioned earlier. The companies also have a licensing agreement in which Magna will pay Serve a fee in exchange for technology to build its own robots for market areas where Serve does not operate.
That licensing revenue stream is gone, leaving Serve with only distribution revenue. And that part of the business is still in the expansion phase. This brings me to an important point. Serve is now down a truckload of money.
Operating expenses in the third quarter were $8.3 million, most of which went to research and development. Given the lower revenue, Serve’s net loss for the quarter was $8 million, bringing its year-to-date net loss to $26.1 million.
Saab only has $50.9 million in cash on hand. If the company continues to burn cash at its current pace, that cushion will completely disappear over the next 18 months. That said, Saab established a new on-market stock offering facility in November that will allow it to sell additional shares and raise an additional $100 million. However, that would significantly dilute existing investors.
Nvidia and Uber together own over 20% of Serve’s outstanding shares
Serve was spun off from Postmates, which was acquired by Uber, and became an independent entity in 2021. However, Uber remains Saab’s largest investor with a 12% stake.
Nvidia has been investing in Serve since 2022 and currently holds an 8% stake.
If Saab continues to issue new shares, Uber and Nvidia could be hit the hardest unless they participate in any future capital increases to protect their interests. However, given the company’s current valuation, that may not be the best move.
Serve is valued at an impressive price-to-sales (P/S) ratio of 196, meaning it is six times more expensive than Nvidia.
SERV PS ratio data by YCharts.
According to average Wall Street forecasts (provided by Yahoo), Serve could generate $13.3 million in revenue in 2025 with the deployment of 2,000 robots. The company is on track to achieve $1.9 million in revenue for all of 2024, which equates to 600% growth.
This estimate gives Saab stock a forward earnings multiple of 31.7, which is much more reasonable, but still expensive. With that in mind, investors who want to follow Uber and Nvidia into Saab stock should only put money they can afford to lose.
That said, the company says its opportunity in the robot and drone delivery industry could exceed $450 billion by 2030. So even a small bet on Saab stock could pay off handsomely if the company is successful.
