Jensen Huang Just Delivered Incredible News for Investors of This Technology Stock

Another technology company is getting in on the artificial intelligence (AI) hype train. Coupang (NYSE: CPNG) announced a formal partnership with Nvidia (NASDAQ: NVDA) to leverage its hardware/software platform to build what it calls an AI factory for its e-commerce logistics network. Shares of Coupang rose on the news but have recently fallen back below $20 amid global stock market turmoil in March.

Here's what Nvidia's partnership means for Coupang and why the stock could be an incredible buy after this announcement.

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Bridging e-commerce and the AI cloud

Coupang is a technology company that makes the majority of its revenue from e-commerce in South Korea. It used the Amazon model to build customer loyalty, vertically integrating its delivery infrastructure and continuously growing its selection of commerce offerings for shoppers.

With Nvidia, Coupang is trying to level up its Coupang Intelligent Cloud, which mainly serves as the compute and AI layer for its internal services, such as optimizing its e-commerce network. Efficiency is the name of the game in e-commerce fulfillment, and Coupang is using AI to optimize its delivery network, predict customer behavior, and streamline its warehouse operations. Nvidia is helping it do so much more efficiently, with computer chip utilization increasing from 65% to 95% after recent optimizations.

For a broad-based e-commerce player like Coupang, optimizations will drive its ability to offer lower prices to customers and the fastest delivery times while maintaining profitability. This partnership with Nvidia makes perfect sense and could also be used on the consumer side by building a Coupang AI agent to help customers shop its vast selection of items (this was not specifically discussed in the press release).

Is Coupang stock now a buy?

Revenue growth has been strong for Coupang. Despite a short-term hit from a data leak scandal last quarter, the company has a track record of growing revenue in the double digits, something it should be able to replicate in the years ahead as it continues to take market share in retail in South Korea.

Disregarding its new ventures into geographies like Taiwan or other product categories such as fashion or food delivery, Coupang's core e-commerce business should become more profitable at a larger scale and leverage these AI efficiencies. Last quarter, its core business's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was 7.7%, despite continued reinvestment for growth.

Over the long term, I expect profit margins to keep expanding, surpassing 10% or more due to these AI efficiencies, among other reasons. Today, Coupang has a market cap of $34 billion and has revenue at about the same level.

Does that make Coupang the cheapest AI stock out there? I think that just might be true, making Coupang a great buy for investors today.

Brett Schafer has positions in Coupang. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy.