Pony AI Inc (NASDAQ: PONY) is up some 20% in premarket after the Chinese startup said it has teamed up with Tencent to develop autonomous driving technology.
At the time of publishing, the stock has pared some early gains and now trades around 10% higher.
Pony will collaborate with the Shenzhen-headquartered giant on areas like “cloud services, mapping, and cockpit ecosystem technologies,” according to its press release on Friday.
Note that Pony AI has already secured a permit from Beijing’s regulatory authorities to charge for its fully autonomous rides in select parts of Shenzhen.
Despite today’s sharp surge, Pony AI stock is still down more than 60% versus its YTD high in late February.
What does Tencent’s partnership mean for Pony AI stock?
Users in the Shenzhen area will now be able to book a Pony AI robotaxi from within WeChat, the press release added.
Partnering with Tencent is a huge step towards the company’s broader commitment to scaling up its operations, given the titan’s massive user base and expertise in cloud offerings, James Peng, the chief executive of Pony AI, said in a CNBC interview today.
Working with Tencent will likely help Pony AI continue to strengthen its hold on the Chinese market for robotaxi services.
Investors should note that Wall Street currently has a consensus “buy” rating on Pony AI stock.
On average, analysts see upside in the robotaxi specialist to $20 at the time of writing.
Pony AI has been struggling with top-line growth
According to Zhong Xiangping, the vice president of Tencent, teaming up with Pony AI Inc “marks a new starting point for collaborative innovation.”
The company’s popular super app, WeChat, currently has more than a billion monthly users.
Teaming up with Tencent may help the Chinese startup with revenue growth as well – something that it has struggled with lately.
In its latest reported quarter, Pony AI saw its robotaxi services revenue tank nearly 62% on a year-over-year basis to $2.6 million.
Note that Pony AI shares do not currently pay a dividend.
Pony AI shares remain a risky investment
While Pony AI is evidently growing fast in the Chinese market, investors should tread with caution as the startup could come in the crosshairs of the escalating US-China trade tensions.
CEO Peng has dubbed the United States a “hugely important” market for the company’s expansion plans on numerous occasions.
However, speaking with the Financial Times earlier this week, he confirmed that PONY was considering a secondary listing as the trade war between the world’s largest two economies could see Washington demand a delisting of Chinese firms from the NYSE.
If Pony AI stock was indeed delisted, its tenure as a US-listed company would be less than six months.
Peng, however, refrained from commenting on what countries the company was exploring for a secondary listing.
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