Chip giant Nvidia (NVDA), with a market cap of $3.59 trillion, has been the market darling ever since the artificial intelligence (AI) revolution began. The company’s explosive growth and market position remain unshakeable. While all eyes remain on Nvidia, any company the chip giant shows interest in also catches investors' attention.
One such company is Serve Robotics (SERV), a developer of autonomous sidewalk delivery robots. In July, Nvidia disclosed a 10% stake in the company. While Nvidia has not disclosed the reason for its investment, it aligns with the chipmaker's broader AI and robotics strategy.
With the increasing adoption of robotics and AI in logistics, Serve Robotics has the potential to capitalize on future trends.
Serve Robotics started trading following its initial public offering (IPO) in April. Since then, the stock has been soaring, particularly after Nvidia showed an interest in the company. In the last six months, the stock is up 172%, compared to the S&P 500 Index’s ($SPX) gain of 12.5%. And if Wall Street’s price estimates prove right, the stock could rally another 80% to 92% over the next 12 months. Let’s find out why.
What Does Serve Robotics Do?
After the spin-off from Uber’s (UBER) Postmates division, a food delivery company that Uber acquired in 2020, Serve Robotics, valued at $374.7 million, has carved out a niche in the rapidly evolving delivery market.
It specializes in the design and deployment of autonomous robots for short-distance deliveries, primarily focused on food and grocery services. The AI-powered robots, resembling compact, four-wheeled rovers, navigate sidewalks using advanced sensors, machine learning, and mapping technologies. Serve's goal is to provide a cost-efficient, sustainable alternative to traditional delivery methods.
It has a multi-year contract with Uber Eats to deploy 2,000 delivery robots in various U.S. markets. In the third quarter, management stated that the company is on track to complete the initial manufacturing and rollout by the end of 2025.
In the third quarter, total revenue was $0.22 million, which included $0.04 million in software service revenue from its agreement with Magna. The company averaged 465 daily supply hours, up 108% from the previous year, with a 97% increase in daily active robots.
This month, Serve announced the acquisition of Vebu's signature robotic product, Autocado, which will provide its restaurant partners with a suite of automation solutions. It also announced a pilot partnership with Wing Aviation to provide "aerial delivery to customers up to 6 miles away."
Serve Robotics has received multiple funding rounds to help it develop and expand in the autonomous delivery sector. In the third quarter, the company announced that it had raised $32.3 million in new capital, providing it with the financial flexibility to fund its expansion plans. At the end of Q3, it had $50.9 million in cash and no outstanding debt obligations.
The company remains unprofitable, focusing its resources on expanding operations and technological advancements. Analysts that cover SERV expect it to post $1.9 million in revenue in 2024. Revenue could, however, increase by 598.2% to $13.3 million in 2025.
Is SERV a Buy, Hold, or Sell on Wall Street?
Overall, Serve Robotics stock is a “strong buy” on Wall Street. All four analysts that cover the stock rate it as a “strong buy.” The average target price of $15 implies a potential upside of 80% from Friday's close. The high estimate of $16 suggests the stock could rally another 92% in 2025.
Serve Robotics operates in a niche market with high growth potential for urban logistics and sustainable delivery solutions. The autonomous delivery robots market is expected to grow at a CAGR of 26.4% to be worth $2.97 billion by 2031.
Nvidia's investment has been critical for Serve Robotics. Other strategic backers include Uber and 7-Eleven, demonstrating their belief in Serve's ability to revolutionize last-mile delivery with zero-emission robotic solutions. The company's robots have already been deployed in cities such as Los Angeles, with plans to expand to additional locations.
The Bottom Line on SERV Stock
Serve, an emerging growth company in the AI and robotics space, offers a high-risk, high-reward scenario. Notable investments by companies such as Nvidia and Uber have increased the company's visibility and credibility in the robotics and AI sectors.
Nonetheless, the company is still in the development stage, and many things can go wrong. Investors should not focus solely on the fact that it is a Nvidia-backed growth stock; instead, they should closely monitor the company's financials before making any investments.
