To The Moon

WeRide's Stock Soars on NVIDIA's Backing

On February 14, 2025, WeRide Inc. ( $WeRide Inc.(WRD)$ ) experienced a dramatic 83.46% surge in its stock price, closing at $31.50. The rally was driven by the disclosure that NVIDIA Corporation ( $NVIDIA(NVDA)$ ) had taken a stake in the company, acquiring 1.74 million shares. This news ignited investor enthusiasm, reflecting NVIDIA’s influential "star effect" and the market’s confidence in its strategic moves. The investment fueled speculation about WeRide’s long-term prospects in autonomous driving and AI-driven mobility solutions.

Company Profile: Fundamentals, Financials, and Real-World Applications

WeRide Inc., headquartered in Guangzhou, China, is a global leader in autonomous driving technology. Founded in 2017, the company provides autonomous driving products and services for the mobility, logistics, and sanitation industries. Its product lineup includes robotaxi, robobus, Donovan, and robosweeper, as well as advanced driver-assistance system (ADAS) solutions.

• Geographic Footprint: While primarily based in the People's Republic of China, WeRide has expanded its testing and operations to 30 cities across seven countries in Asia, the Middle East, and Europe, indicating a growing global ambition. Further expansion into Japan, Europe, and the Middle East is under consideration.  

• Revenue Generation: WeRide is a revenue-generating company, although recent financials indicate some fluctuations. Revenue for the six months ending June 30, 2024, was RMB 150.3 million, down from RMB 182.9 million in the same period in 2023. Full-year 2023 revenue was RMB 401.8 million (approximately US$55.3 million), a decrease from RMB 527.5 million in 2022. However, a significant 281.7% revenue increase was observed between 2021 and 2022.

• Profitability Challenges: The company is not currently profitable and does not project profitability within the next three years. Net losses were substantial, with RMB 1,949.1 million (US$268.2 million) in 2023 and RMB 881.7 million (US$121.3 million) for the first half of 2024.

• Market Capitalization: Before the NVIDIA investment disclosure, WeRide's market cap was around $4.71 billion (February 13, 2025). Following the news, it has significantly increased, reaching approximately $8.3 billion.

• Strategic Partnerships: WeRide has established collaborations with major industry players, including automotive giants like Renault and Nissan. In the UAE, it is partnering with Uber to deploy robotaxi services, showcasing its expanding network and industry integration. The company is also expanding its presence in Europe by deploying autonomous robobus shuttles at Zurich Airport.

NVIDIA’s Investment in WRD: Strategic Objectives and Portfolio Approach

NVIDIA’s decision to invest in WeRide aligns with its broader AI and autonomous vehicle strategy. As a leader in GPU computing and AI-driven applications, NVIDIA benefits from integrating its hardware and software solutions into autonomous mobility ecosystems.

Why Invest in WeRide?

1. Strategic Positioning in Autonomous Driving: NVIDIA recognizes WeRide’s potential in L4 autonomy, a critical component of future mobility.

2. Synergy with NVIDIA’s AI Technology: WeRide’s reliance on AI and machine learning aligns with NVIDIA’s broader AI-driven automotive solutions.

3. Diversification in AI-Driven Investments: NVIDIA has made selective bets on AI-powered companies, reducing its stakes in SoundHound AI, Serve Robotics, and Arm Holdings while increasing its exposure to WeRide.

Why a Portfolio Investment, Not a Direct Stake or Acquisition?

Instead of a direct stake or acquisition, NVIDIA chose to invest through its portfolio, likely due to:

• Regulatory Concerns: Given WeRide’s operations in China and its involvement in autonomous driving, acquiring a direct stake could attract scrutiny from both U.S. and Chinese regulators. China has tightened restrictions on foreign ownership of AI and autonomous driving firms, and the U.S. also has export controls on AI-related tech. By investing through the open market, NVIDIA avoids potential geopolitical and regulatory roadblocks.

• Operational Flexibility: Holding WRD shares allows NVIDIA to benefit from WeRide’s growth without direct management responsibilities.

• Gradual Positioning for Potential Future Moves: This could be an initial step before a larger move. If WeRide performs well and regulatory conditions improve, NVIDIA might negotiate a direct stake or acquisition in the future. Buying on the open market allows NVIDIA to establish a position early without committing to full ownership.

NVIDIA's Holding Percentage and Institutional Context

Based on NVIDIA's disclosed 1.7 million shares and an estimated outstanding share count for WeRide of 274.49 million, NVIDIA's current holding is approximately 0.62% of WeRide's outstanding shares.

While this percentage appears small, it is crucial to consider the context of institutional ownership in WRD. Reportedly, general institutional ownership in WeRide is very low, around 0.01%. Therefore, NVIDIA's 0.62% stake becomes a notably significant institutional holding, making it a prominent investor in the company.

Investment Strategy for WRD Post-Surge: Caution and Patience

Analyst projections before this surge set a 12-month price target of $22, suggesting a potential overvaluation at the current price. Following NVIDIA’s investment disclosure, WRD’s price skyrocketed, making immediate entry risky due to potential short-term profit-taking. A prudent investment strategy might include:

• Exercise Patience: It is generally advisable to avoid chasing the surge. Significant price jumps are often followed by consolidation or pullbacks. Waiting for a potential price correction could offer a more favourable entry point.

• Evaluating Future NVIDIA Moves: If NVIDIA increases its stake or collaborates with WeRide, this would reinforce a long-term bullish outlook.

• Re-evaluate Valuation: Assess if WeRide's current valuation, after the surge, is justified by its fundamentals, growth prospects, and profitability outlook. Compare its valuation metrics to industry peers.

• Long-Term Perspective: If you believe in WeRide's long-term potential and Nvidia's strategic investment, consider a long-term perspective. This can help you ride out short-term volatility and benefit from the company's growth over time.

• Dollar-Cost Averaging: Instead of investing a lump sum, consider dollar-cost averaging. This involves investing a fixed amount at regular intervals, which can help mitigate the impact of short-term price fluctuations.

Conclusion

NVIDIA’s stake in WeRide is a strong vote of confidence in the future of autonomous mobility. While WRD's stock has surged dramatically, making immediate entry risky, the company’s long-term potential remains compelling. Investors should monitor price movements, NVIDIA’s future positioning, and WeRide’s financial performance before making investment decisions.

@TigerWire