For a long time, Uber (UBER) critics called the company’s “growth at all costs” strategy a poor business model. Some said it will die under the weight of venture capital and subsidies. But prudent stock market professionals always pointed out the importance of Uber’s data. That importance is becoming relevant now as data-hungry AI models look for high-quality data to build and offer new products.
In a recent development, Nvidia (NVDA) and Mercedes (MBGYY), in a bid to start a new robotaxi company, have partnered with UBER. The reason for the partnership is obvious. Uber sits on billions of miles of real-life data. Anyone who wants to build the next infrastructure layer of autonomous transport hopes to get their hands on this data, and Uber isn’t just handing it over to any other company. By collaborating with Nvidia and Mercedes, two of the top companies in their respective domains, it has indicated that it aims to be a part of the new ecosystem.
Uber Technologies develops and operates its proprietary technology applications across the world. It is commonly known for its ride-hailing and delivery services, and its name has become synonymous with ride-hailing, much like Alphabet’s (GOOG) (GOOGL) Google name became associated with searching for anything online. The firm is headquartered in San Francisco, California.
UBER’s one-year returns of 22% are nothing special, but they have still marginally outperformed the broader market. This is perfect for those waiting for Uber’s autonomous driving thesis to play out.
Much like Tesla (TSLA) on many occasions in the past decade, Uber’s valuation is a much-debated topic. For example, the company’s forward price-to-book value of 5.74x is trading at a 25% discount to the five-year average. Yet it is impossible to come up with the correct book value for the valuable data that it holds. A forward P/E of 23.3x compared to the 5-year average of 33.66x is similarly trading at a discount. Either investors doubt its role in the future of autonomous driving due to the existing players in the domain, like Tesla and Alphabet, or they simply overpaid in the past. No matter what your opinion about it, there is no doubt that the stock is cheap and could be at an inflection point pertaining to the use of the data it sits on.
