Could Serve Robotics become the next Nvidia?

Nvidia’s (NVDA -3.22%) Over the past five years, its stock price has risen 2,630%, increasing its market capitalization to nearly $3.5 trillion, making it the world’s most valuable company. Much of this increase was driven by strong sales of AI-oriented GPUs for data centers.

From fiscal year 2019 to fiscal year 2024 (ending in January of this year), Nvidia’s revenue grew at a compound annual growth rate (CAGR) of 39%. However, analysts expect the company’s revenue to grow at an even faster CAGR of 53% from FY2024 to FY2027 as the AI ​​market continues to expand.

Image source: Saab Robotics.

These long-term trends make Nvidia a great long-term investment, but it may be difficult to replicate the billionaire gains of the past few years. So if you’re looking for the “next Nvidia,” you might want to check out the smaller AI companies chipmakers are investing in.

One company that stands out is Serve Robotics. (service -1.54%)a manufacturer of AI-powered sidewalk delivery robots. Let’s see if this small $384 million company can eventually become a $1 trillion tech giant like Nvidia.

Small players in the nascent market

Serve Robotics was founded in 2017 within Postmates, a food delivery service acquired by Uber Technologies. (Uber 2.69%) Uber then spun off Serve Robotics as an independent company in 2021, but continued to use delivery robots to fulfill orders in select areas across Los Angeles. The latest third-generation robot can travel 78 miles on a single charge, carry up to 15 gallons of cargo, and has a top speed of 11 miles per hour. It is also resistant to extreme temperatures and heavy rain.

Saab Robotics completed a reverse merger with blank check company Patricia Acquisition in 2023, paving the way for its listing on the Nasdaq on April 18th at $4 a share. However, it ended its first day at just $3.11 and fell below $3 by the end of the year. first month.

Currently, Saab stock is trading near $9. Most of that increase came in July of this year after Nvidia revealed it had acquired a 10% stake in the company. This vote of confidence brought back many bulls, even though the company is still barely making any money.

How far can Serve Robotics grow?

Serve has 100 robots, but only 59 were in operation for Uber Eats in the Los Angeles area in Q3 2024. It posted a net loss, with revenue of just $1.6 million in the first nine months of 2024. $26.1 million.

Analysts expect full-year sales of $1.9 million and net loss of $34.3 million. The company is valued at $384 million, more than 200 times this year’s sales, which may seem wildly overvalued. But in 2025, Saab plans to deploy up to 2,000 robots for Uber Eats across the Los Angeles and Dallas-Fort Worth metropolitan areas.

If that ambitious expansion is achieved, analysts expect the company’s sales to jump to $13.3 million in 2025 and $59.5 million in 2026. So you could argue that Serve is not that expensive at around 6.5x 2026 sales.

If Serve succeeds in expanding its fleet of autonomous delivery robots for Uber Eats, it could gain even more attention from other delivery-oriented companies. These new customers will reduce dependence on Uber and drive long-term growth.

According to Precedence Research, the global delivery robot market is likely to expand at a CAGR of 32% from 2024 to 2034. That growth is likely to be driven by labor shortages, increased e-commerce sales, and the development of more efficient autonomous robots. These small robots can also be considered a safer, cheaper, and more reliable alternative to human drivers for last-mile deliveries. Therefore, if the company can break out of its niche market, it could have significant long-term benefits.

But could Serve Robotics become the next Nvidia?

Serve may have a bright future, but it’s too early to tell whether it can expand production, attract more customers, and diversify its business with other types of autonomous robots. So while we can’t seriously call it “the next Nvidia” just yet, it’s easy to see why Nvidia would buy a piece of this upstart AI company. Investors looking for a high-risk, high-return strategy in the burgeoning AI market can consider following Nvidia’s lead.