Will Cerence AI and Nvidia's large contract become the focus of the AI market?

Massachusetts-based AI company Cerence AI has announced a partnership with Nvidia. As a result, on January 3 (Friday), the company's stock price surged by about 140% in one day, attracting sudden market attention. The contract focuses on strengthening generative AI solutions for automobiles and developing new large-scale language models leveraging Nvidia's technology.
In the past few years, Cerence has faced challenging times with declining sales and expanding losses, but with this contract, they aim to regain market presence. However, Wall Street's evaluation is cautious, and it can be said that investors will continue to closely monitor the developments.

Cerence AI's generative AI solution 'CaLLM' is gaining attention as a tool that innovates communication between drivers and vehicles. This technology enables conversations with chatbots equipped with general knowledge, in addition to operations such as adjusting in-car temperature and seat positions. Through the partnership with Nvidia, the company has announced plans to improve the performance of language models and provide more advanced features.
As a result, auto manufacturers may have the potential to achieve cost reductions and efficiency improvements simultaneously. Particularly, Nvidia's technology is widely accepted as a standard in the AI industry, and the impact of its adoption is significant. However, it remains unknown what ripple effects this technology will have on the overall market. As competition intensifies within the industry, how Cerence AI differentiates itself will be key to its future.

Cerence AI has been advancing large-scale transformation plans such as cost reductions and management team restructuring in response to declining sales and expanding losses. The company stated that it aims to achieve annual cost savings of 35 to 40 million dollars through this, and plans to launch 22 platforms including generative AI solutions in the fiscal year 2024. The partnership with Nvidia amidst this background indicates signs of success in the company's business strategy.
However, past performance of the management team and criticisms from the market are also significant factors that cannot be ignored. In particular, the leadership of the new CEO, Brian Krzanich, remains unclear in terms of its impact on the company's transformation. Additionally, investors are closely watching how much this contract contributes to short-term market evaluation. While leveraging Nvidia's brand strength, the focus is on how much long-term competitive advantage can be built.

Following the announcement of the contract with Nvidia, Cerence AI's stock price surged, but Wall Street's evaluation remains cautious. Analysts' consensus rating is 'hold', with an average target price set at $5.12 below the current stock price. This evaluation is believed to reflect the impact of previous profit declines and revenue reductions.
On the other hand, the market does not completely deny the potential of the company in the field of generative AI. In particular, the results of the collaboration with Nvidia will greatly influence future evaluations. As an investor, it is important to assess Cerence's growth strategy from a long-term perspective rather than being swayed by short-term stock price fluctuations. While this contract has certainly opened up new possibilities, I believe a calm attitude is necessary until actual results are visible.