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Serve Robotics Inc (Nasdaq: SERV) saw its stock price skyrocket by 140% on Friday following the announcement that AI giant Nvidia Corp (Nasdaq: NVDA) had acquired a substantial stake in the company, which specializes in low-emissions sidewalk delivery robots.

Nvidia’s strategic investment

Nvidia invested over $3.7 million to purchase just over 1 million shares of Serve Robotics, according to a securities filing released on Friday. 

This translates to an average price of $2.42 per share. Nvidia’s initial investment in Serve Robotics was made in July 2023, and in April this year, the company converted a promissory note into 1.05 million shares of SERV.

Market reaction and volume surge

Following the news, Serve Robotics’ stock saw a massive increase in trading volume. 

By the time of writing, more than 120 million shares had exchanged hands, significantly higher than the average daily trading volume of around half a million shares. 

Despite Nvidia’s stock falling by 1.0% on Friday, the news of its investment sent Serve Robotics’ shares soaring.

Ownership and strategic partnerships

Nvidia now owns about 10% of Serve Robotics. Other notable investors include Postmates, a subsidiary of Uber Technologies Inc., which is one of the largest shareholders and a strategic partner of Serve Robotics. 

Serve Robotics went public as an “OTCQB” in March and was uplisted to Nasdaq in April.

Investor caution

Given the volatility, investors are advised to exercise caution. 

Serve Robotics’ stock, which was priced at $2.63 at the close on Thursday, could potentially lose its gains as quickly as it acquired them.

Comparison to SoundHound AI

Nvidia’s investment strategy often involves taking significant stakes in companies integral to artificial intelligence. 

Earlier this year, Nvidia announced a $3.7 million stake in SoundHound AI, which saw a temporary surge in its stock price. 

However, SoundHound AI’s stock, which peaked at $8.91 in mid-March, is now trading just above $5.0. 

This raises questions about whether Serve Robotics can sustain its Nvidia-related gains in the coming weeks and months.

Financial performance

In May, Serve Robotics reported $95 million in revenue for its first financial quarter, with $85 million coming from an agreement with Magna. 

The company confirmed that the remaining $35 million from that deal will be realized in Q2 of 2024.

The recent surge in Serve Robotics’ stock price following Nvidia’s investment underscores the market’s enthusiasm for AI-related ventures. 

However, given the stock’s volatility and the experiences of similar companies, investors should remain cautious while evaluating the long-term potential of Serve Robotics.

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