Ginkgo Bioworks (DNA 6.67%) is a biotech that's operating on multiple bleeding edges of innovation as it works to engineer and manufacture biological cells at scale. Between its highly automated cell culture facilities and its machine learning-enabled gene-editing capabilities, this company is betting big on the disruptive power of innovative technology.

Betting on young and innovative businesses is often highly risky for investors, and this stock is no exception. Will its innovative uses of artificial intelligence (AI) and robotics be enough to make investors wealthier, or is it better to wait and see what this upstart biotech can do before deciding whether to invest? 

AI might become a competitive advantage for Ginkgo, and soon

Ginkgo makes money by designing and culturing microorganisms like yeast that are intended to help produce valuable molecules. Its customers approach the company with a target molecule they need more of. Ginkgo scientists and engineers work with the partner company to genetically engineer the appropriate cell platform for the task, grow the engineered cells in bioreactors at a large scale, isolate the product of interest, and then finally pass the product back to the customer.

In one example of this, Ginkgo announced in January that it was starting to work with an infant formula business called NAMUH that is seeking to make molecules that are typically only found in human breast milk. Because yeast and other cell platforms can be used to create a plethora of different economically valuable molecules, including commodity chemicals and large or complex molecules like proteins, Ginkgo is already attracting customers in industries ranging from biotechnology to industrial materials and agriculture.

Management recently released a preliminary revenue report covering all of fiscal 2022 and said it expects to bring in as much as $480 million in sales. That suggests its services are in demand. But in order to serve that demand, the business needs to figure out how to engineer its microorganisms to accomplish what its customers want. That isn't a trivial task.

For more complicated molecular outputs, it's often necessary to encode entire biosynthesis pathways into the genomes of its cells. And that's if you know what you want to produce. Sometimes customers might not even know the exact structure of the molecule they want. So Ginkgo uses machine learning and other functional artificial intelligence techniques to aid in the screening for molecules that might fit the customer's needs and to determine how to incorporate the appropriate biosynthesis pathways into the cellular genome.

When paired with its heavy investment in laboratory robotics and other forms of automation, the biotech's AI acumen could eventually enable largely automated servicing of customers' demands. That would slash the labor hours it'd need to devote to pretty much everything a company with its business model needs to do in the laboratory. Hopefully, it would result in much lower costs as well. Returns should improve as well as Ginkgo scales up.

Its business model is still unproven

So the company is already using AI tools to make its work easier. But it's still unprofitable, and its trailing-12-month cash burn was more than $344.7 million. Furthermore, one core element of management's proposed investing thesis for the stock remains uncertain. 

Management says Ginkgo is increasing the scale of its operations in terms of the throughput of its automated laboratories. It also appears to be driving down its cost per program. These both suggest there is progress being made on its goal to take advantage of economies of scale in the cellular manufacturing process, which could portend outsized profits down the line.

And yet, Ginkgo's quarterly gross margin has fallen over the last three years. That suggests there's a disconnect somewhere between what's being claimed about the benefits of scaling up its operations and the actual financial data. 

It might be better to wait and see on Ginkgo

If you're willing to make a somewhat speculative purchase with the hope that Ginkgo can become profitable while onboarding more customers and growing the top line -- a difficult, but possible goal, given its capabilities and business model -- now's the time to invest. It could easily be one of the most important businesses in biopharma by the end of the decade, and that should make shareholders richer. 

But for most investors, the better move is to wait for it to report its full-year financial performance for 2022, which should happen sometime in March. If its gross margin looks to be dramatically improved while revenue is growing, it'll be a strong sign that Ginkgo is ripe for a purchase and long-term hold. If it doesn't, it's a sign that management has more work to do to find the right path forward.