(SERV), (NVDA), (UBER), (DASH)
Well, it looks like Nvidia's (NVDA) not content with just ruling the AI chip roost. They've decided to take a stroll down Robotics Lane, and boy, is it turning heads.
Remember when I told you about the barbell strategy, balancing tech and recovery stocks? Well, Nvidia's playing its own version of financial Twister, with one foot firmly planted in AI chips and the other testing the waters of autonomous delivery.
The chip giant just converted a promissory note faster than you can say "burrito delivery," snagging over a million shares in Serve Robotics (SERV).
This brings Nvidia's total investment to l $12 million, giving it a 10% stake in the company. And, when the news broke, Serve's stock shot up 225%.
But let's rewind a bit. Serve actually has quite the pedigree.
Serve Robotics is the wonder child of the delivery world. It started life as Postmates X, the robotic brainchild of Postmates. But in 2020, Uber (UBER) crashed the family reunion, adopting Postmates for a cool $2.65 billion.
In the ensuing chaos, little Serve was spun out faster than you can say “emancipation,” becoming the independent robot delivery wunderkind we know today.
At Serve's public debut, Nvidia already owned 2.614 million shares. They then snagged another 62,500 shares in a private placement.
This latest move adds another 1.050 million shares to their collection, bringing the total to 3.727 million.
Now, Serve's little R2D2s aren't just eye candy. They've been zipping around Los Angeles since 2020, completing over 10,000 deliveries for Postmates by year's end.
Fast forward to 2023, and they've expanded to a fleet of 100 robots, completing over 50,000 deliveries for 300 restaurants with a jaw-dropping 99.94% success rate.
That's more reliable than my Swiss watch - and trust me, that thing's outlasted relationships.
These sidewalk warriors boast Level 4 autonomy, meaning they can navigate sidewalks using AI without human intervention. It's like giving a Roomba a promotion and a delivery bag.
The company's got big plans as well, aiming to deploy 2,000 of these mechanical meal couriers by 2025 in cities like San Diego, Dallas, and Vancouver.
They've even got Magna International (MGA), a $12 billion auto parts bigwig, signed on to manufacture these robots exclusively.
But let's zoom out for a second. Serve's management is betting on a global market for robotic and drone delivery worth a staggering $450 billion in annual revenue by 2030.
That's no small potatoes. Just look at DoorDash (DASH), which saw its revenue skyrocket by 200% from 2020 to 2023.
The US food delivery industry alone is set to generate over $353 billion in revenue this year. DoorDash leads the pack with a 67% market share, followed by Uber Eats at 23%.
Both rely on human drivers, but Serve is asking the million-dollar question: Why use a 2-ton car to deliver a 2-pound burrito?
Now, you might be thinking, "John, this sounds like the next big thing." And you might be right... eventually.
But before you rush to jump on this robotic bandwagon, let's take a closer look at what we're dealing with here.
Serve's revenue last year was a modest $207,545 - less than I spend on vintage wine. Sure, they're growing. Q1 2024 saw them rake in $946,711, but $850,000 of that was from the Magna licensing deal.
Their actual delivery business though? It's pulling in about as much as a lemonade stand in a desert.
And here's where it gets dicey: Serve is burning through cash faster than a sailor on shore leave. They lost $9 million in Q1 2024 alone, with $8.3 million in operating costs.
At this rate, they're on track to lose significantly more than the $20.7 million they hemorrhaged in 2023.
But hey, they've got some heavy hitters in their corner. Besides Nvidia's $12 million investment since 2018, Uber has thrown in $11.5 million. Even Delivery Hero (DLVHF) and 7-Eleven are getting a piece of the action.
Now, don't get me wrong. I love new tech as much as the next guy. Heck, I've flown MiG-25s at the edge of space and climbed Everest. But even I know that sometimes, the view from the top isn't worth the climb if your gear's not up to snuff.
Sure, Nvidia's backing is a nice vote of confidence. But let's put this in perspective: Nvidia's $12 million investment is like me losing the change in my couch cushions. It's a rounding error for a $2.9 trillion behemoth.
What's the play here then? Well, as much as I'd love to tell you to go all-in on robot deliveries, I'm going to have to curb your enthusiasm (get it?) and pour some cold sake on that idea.
The robot revolution in last-mile delivery is coming, no doubt about it. But at the moment, investing in Serve is like trying to deliver a souffle by drone - it might work eventually, but there's a good chance it'll end up a mess on your doorstep.
So, for now, Serve Robotics is a "watch and wait" situation.
