NVIDIA (NVDA) to Move Further into Autonomous Car Market

Zacks Equity Research

Over the last few years, NVIDIA Corporation NVDA has been putting in a lot of effort to strengthen its position in several emerging industries. Apart from Artificial Intelligence (AI) and deep learning, the company is working hard to establish itself in the driverless cars industry, and yes, its efforts have been rather impressive.

Most recently, NVIDIA achieved another milestone in this space after the California Department of Motor Vehicles (CDMV) granted it a permit for testing self-driving vehicle technology on public roads for the first time.

It should be noted that California has been a hotbed for autonomous testing since 2014, as it was the first state that established regulations for self-driving vehicles on its public roads. Since then, various companies including Alphabet Inc. GOOGL and Tesla Motors TSLA have been cleared by CDMV to test their driverless cars.

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Notably, since 2015, NVIDIA has been providing various autonomous technologies such as digital instrument clusters, navigation, advanced driver-assistance systems and infotainment under its partnerships with several automakers including Honda HMC, Tesla Motors, Audi, Volvo, Mercedes-Benz and BMW.

Therefore, we believe that the recent permit to test its driverless cars will encourage various other auto manufacturers to use NVIDIA’s processing units in their autonomous driving systems.

NVIDIA’s Journey in the Driverless Cars Space

NVIDIA forayed into autonomous vehicle and other automotive electronics space in 2015 by launching a computer vision system at the Consumer Electronics Show. It hasn’t looked back since then and has been continuously bringing new and more advanced technologies in the space.

At the beginning of this year, NVIDIA launched DRIVE PX 2 – the world’s most powerful engine for in-vehicle AI. The company’s Drive PX 2 computer chip for self-driving cars is considered to be as powerful as 150 MacBook Pros, and has the capacity to power 12 video camera inputs and sensor fusion. The chip, according to NVIDIA, can run about 24 trillion deep learning operations per second, thereby enabling driverless cars to determine the next move in a fraction of a second.

In Sep 2016, the graphic chip behemoth unveiled a new AI supercomputer chip designed for self-driving cars called Xavier at its GPU Technology Conference (GTC) in Amsterdam. Xavier is a system-on-chip (SoC), which is built with an 8-core ARM64-based CPU and a next generation 512 core NVIDIA GPU. The chip also integrates a new computer vision accelerator.

As per the company, the processor is capable of delivering 20 trillion operations per second (TOPS) of performance, while consuming just 20 watts of power. The company anticipates making the processor available to automakers and other groups developing self-driving cars during the fourth quarter of 2017.

Huge Growth Potential of the Industry

According to data available from BI intelligence, 10 million self driving cars will be on the road by 2020. Per Statista, the market for fully autonomous vehicles will grow to almost $6 billion while partially autonomous vehicles market will reach $36 billion by 2025. According to Boston Consulting Group estimates, the autonomous car market will be worth $42 billion by 2025 and $77 billion by 2035.

These estimates encourage us about NVIDIA’s growth prospects in the space. With its sustained focus on developing new and more advanced technologies for self-diving cars, we believe that the company is well poised to capitalize on this opportunity.

Bottom Line

NVIDIA continues to be the world’s biggest graphic processing hardware provider for PCs since the past several decades. The company’s efforts toward autonomous vehicle segment indicate that it intends to be the largest player in the self-driving and machine learning arena too. Furthermore, by expanding its business avenues, the company will be able to reduce its dependency on the PC industry, which is currently declining.

It should be noted that during the last reported quarterly results, the company witnessed a 61% year-over-year jump in automotive segment revenues, mainly driven by premium infotainment and digital cockpit features in mainstream cars.

The stock has been clocking solid returns since the beginning of 2016 and has gained approximately 179% year to date, outperforming the Zacks Semiconductor-General industry return of just about 30%.

The stock has grabbed the spotlight with striking performances on the back of solid earnings results and strong growth projections. Keeping this in mind, we believe investing in this stock would yield strong returns for your portfolio in the short term.

Currently, NVIDIA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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