For a company known for being the leader in PC graphics chips, NVIDIA Corporation (NASDAQ:NVDA) is doing a really good job as of late at diversifying from its core business. The company is working on several exciting projects that have the potential to fuel Nvidia’s growth over the next several years. NVDA stock is up about 56% over the last year.
Let’s take a look at one catalyst that could send NVDA stock even higher…
Nvidia announced last week that competitors in the upcoming Formula E Roborace self-driving car race series will use the company’s “Drive PX 2” supercomputer as the brains behind the vehicles.
The autonomous driving race will be the first of its kind. It will feature 10 competing Roborace teams that will all use identical cars, which means that it will be up to the software that each team brings to the race to win. Each team will need to write code in passing maneuvers and competitive behavior.
Nvidia isn’t making a dime off the race, as the company will supply 20 of its Drive PX 2 computers for free. But the race is a chance for Nvidia to showcase that its driverless car technology—an area that the company is making a big push into—is ready to be put to the test.
And it’s no wonder that Nvidia is developing technology for autonomous vehicles. The market for cars that drive themselves is about to take off in a big way. According to Boston Consulting Group, the market for autonomous cars will be worth about $42.0 billion by 2025 and could account for a quarter of global auto sales by 2035. (Source: “Driverless-Car Global Market Seen Reaching $42 Billion by 2025,” Bloomberg, January 8, 2015.)
In January, the company announced its Drive PX 2 processor that will power driverless cars. Nvidia says the processing power is equivalent to that of 150 “MacBook Pros.” It can also handle up to 12 camera inputs, light detection and ranging (LiDar), radar, and ultrasonic sensors. The processor takes in information from all cameras and sensors, then decides the car’s next move. (Source: “NVIDIA Boosts IQ of Self-Driving Cars With World’s First In-Car Artificial Intelligence Supercomputer,” NVIDIA Corporation, January 4, 2016.)
Volvo AB (STO:VOLV-B) is already using the Drive PX 2 to power a fleet of 100 self-driving SUVs in the company’s self-driving pilot program.
The Drive PX 2 computer can fit in your trunk, but what good is all that power without software to run it? Nvidia’s “DriveWorks” platform is the answer to that. At the company’s annual technology conference last week, Nvidia CEO Jen-Hsun Huang announced that the platform would be launched in spring 2016, so it should be introduced soon.
The developer platform will feature sensor fusion and computation vision software that can support up to 12 cameras and other sensors to model the vehicle’s environment. Advanced machine learning capability will help the vehicle navigate and it will be coupled with cloud-based processing power using the company’s recently unveiled $130,000 “DGX-1” supercomputer.
Huang said the technology greatly reduces the cost of mapping environments and training autonomous vehicles compared to previous generations of driverless car technologies. (Source: “Nvidia goes all-in on self-driving cars, including a robotic car racing league,” Extreme Tech, April 6, 2016.)
What’s really interesting about the Drive PX 2 platform is that it will be offering a deep neural network, which is a type of artificial intelligence. With traditional driverless car technology, vehicles had to rely on manually coded algorithms to follow a certain route and provide vehicle control. With “DAVENET,” Nvidia’s deep neural network, Huang said that after 3,000 miles of supervised driving, its car was able to navigate on highways, country roads, and gravel driveways, and in the rain, too. (Source: Ibid.)
Nvidia is hoping that its latest driverless car products will entice carmakers to take advantage of the company’s latest technologies.
Right now, Nvidia’s auto segment only comprises a small percentage of total revenue, but it’s also the company’s fastest-growing segment and it will be a huge growth-driver for years to come. In the latest quarter, sales in the company’s auto segment grew 66% over last year, up to $93.0 million. (Source: “NVIDIA Quarterly Revenue Trend,” NVIDIA Corporation, last accessed April 11, 2016.)
The Bottom Line on NVDA Stock
Huang believes that the automotive segment will eventually be a $1.0-billion business for the company. (Source: “Nvidia CEO Sees Automotive Business Growing to $1 Billion,” Bloomberg, June 13, 2013.) If Nvidia’s latest driverless car technologies take off with carmakers, NVDA stock could have huge potential over the next few years.