Shares of tiny robotics firm Arbe Robotics (NASDAQ:ARBE) are rocketing 53% higher heading into midday after reporting a collaboration with Nvidia (NASDAQ:NVDA) for AI-enhanced mapping technology for the automotive industry.
ARBE stock’s move looks similar to another AI-adjacent company, SoundHound AI (NASDAQ:SOUN), whose shares went from penny stock level to market darling on news about Nvidia.
With SoundHound on a sustained run higher over the past year as a result, can investors expect a similar trajectory for this largely unheard of robotics stock? Let’s take a closer look to find out.
24/7 Wall St. Key Points:
- Small-cap Arbe Robotics (ARBE) shot 53% higher on news of a collaboration with AI chipmaker Nvidia (NVDA).
- AI speech recognition leader SoundHound AI (SOUN) saw similar gains earlier this year on news of a relationship with Nvidia, but the two situations may not be comparable.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Mapping a path forward in autonomous vehicles
Arbe Robotics is a small-cap company developing advanced 4-D imaging radar solutions that are designed to replace LiDAR in automotive applications. It offers advanced chipset solutions for autonomous driving and autopilot systems, including detecting stationary objects, identifying vulnerable road users, operating in poor lighting conditions, and eliminating false alarms.
Its primary target market is Tier 1 auto manufacturers in the U.S. and abroad, and it says it is in active discussion with 16 OEMs, 12 of which are now in a bidding phase. In the third quarter it said it collaborated with a leading European truck manufacturer that plans to incorporate Arbe’s radar chipset into its next-generation sensor suite.
However, Arbe’s business is negligible. It generated just $123,000 in the third quarter — yes, one hundred twenty three thousand dollars — a 74% plunge from last year’s total — even as costs rose year-over-year to produce gross losses of $271,000. Year-to-date losses total more than a half-million dollars and it produced net losses of over $37 million dollars, or $0.58 per share.
Fortunately, it has no long-term debt, other than operating leases of $1.4 million, but has $18.8 million in cash and equivalents after a $49 million public offering last quarter.
Which is why a partnership with Nvidia could be a game-changer for the robotics company. If only that’s what it was.
Much ado about nothing?
There seems to be less than what meets the eye in Arbe Robotics announcement of a “collaboration” with the AI chipmaker.
Arbe is making use of Nvidia’s DRIVE AGX in-vehicle computing platform. According the Nvidia’s website, the platform is “an open and modular platform running NVIDIA DRIVE OS and when coupled with supported sensors and accessories, enables manufacturers to build autonomous driving functions and in-vehicle AI applications.”
Essentially, it sounds like Arbe Robotics is taking an Nvidia product and incorporating it into its mapping technology. Now that might make Arbe’s technology even better and more attractive to auto manufacturers, but it seems a bit removed from a “collaboration” as you might typically think of the word.
This doesn’t appear to make ARBE stock the next SoundHound AI. It says more about Nvidia moving into the automotive world than it does about Arbe Robotics doing anything substantive.
Key takeaways
With SoundHound, Nvidia actually invested in the AI speech recognition specialist. Analysts expect that market to greatly expand over the next few years and be worth tens of billions of dollars.
Even so, despite SoundHound nearly doubling revenues in the recent quarter, it is still a money-losing operation with no real expectation of turning that around anytime soon. Arbe Robotics is even further behind on that premise and simply using Nvidia’s platform to better enhance its product does not change that trajectory.
I’m wary of companies that seek to gain by press release. Arbe Robotics is a very small outfit that has few sales, widening losses, and operates in an intensely competitive market. There may be room for ARBE to grow, but investors may still want to take their profits here ahead of the inevitable crash back to earth.
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