What's Next For AEye Stock After Gaining 3x In A Week?

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AEye stock (NASDAQ: LIDR) surged nearly 50% on Friday and has now increased over 3x in only a week, driven by news of a collaboration with AI semiconductor leader Nvidia. AEye specializes in adaptive LiDAR (light detection and ranging) technology that facilitates advanced driver-assistance systems (ADAS) and capabilities for autonomous vehicles. What could be prompting this much investor interest in a micro-cap LiDAR firm that has trailing twelve-month revenue of merely $246,000 and is significantly in the red?

Tying Into Nvidia’s Ecosystem

AEye announced that its flagship Apollo lidar sensor has been integrated into Nvidia’s DRIVE AGX platform, which is a popular hardware and software system designed to facilitate autonomous and semi-autonomous driving functionalities. DRIVE AGX acts as the computing foundation for numerous global automakers that are developing smart and self-driving automobiles, providing high-performance AI processing, sensor fusion, and real-time decision-making features.

By aligning with this platform, AEye gains entry to a significant and expanding ecosystem of OEMs and Tier 1 suppliers engaged in autonomous vehicle development, ranging from Level 2 driver-assistance systems to completely autonomous Level 5 vehicles. This partnership also enables AEye to attain technical validation and visibility without incurring substantial independent expenses on sales or marketing, thereby reducing customer acquisition costs. As investors explore the AI sector for the next emerging player, could AI contender AMD see a lift ahead of earnings?

Risks Galore

However, several risks must be considered. AEye is still a very early-stage company. It generated only $64,000 in revenue last quarter, and overall sales over the past 12 months fell by 71% to just $240,000. Consequently, the stock trades at an enormous price-to-sales ratio of 314x, compared to a 3.1x multiple for the S&P 500. Operating losses are substantial, with a trailing operating loss of $32 million and no immediate prospect for profitability. This high rate of cash burn poses a risk for the company. While the Nvidia partnership is hopeful, it does not assure commercial orders or long-term adoption since the agreement is not exclusive, and Nvidia is collaborating with several other lidar partners. Currently, the partnership gives AEye access, but that may or may not eventually convert into revenue. Investors pursuing the rally should proceed with caution as AEye is a highly volatile microcap stock with a market capitalization of approximately $90 million.

While it is prudent to be cautious about LIDR stock at this moment, you might want to investigate the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver strong returns for investors. What accounts for this? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offers a proactive approach to capitalize on favorable market conditions while mitigating losses when markets take a downturn, as detailed in RV Portfolio performance metrics.