If you’re thinking of making a play in the driverless car sector, NVIDIA Corporation (NASDAQ:NVDA) might be the last stock you would think of to put your hard-earned cash in. You’re probably thinking of Alphabet Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), or Tesla Motors Inc (NASDAQ:TSLA), as they grab most of the headlines in the sector. But behind the scenes, these companies need a powerful processor to compute all that road and traffic data. That’s where NVIDIA, which is best known for its powerful graphics processors for the most demanding PC games and beyond, steps in. NVDA stock stands to benefit in a huge way.
Car of the Future
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 about $42.0 billion by 2025 and may 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; http://www.bloomberg.com/news/articles/2015-01-08/driverless-car-global-market-seen-reaching-42-billion-by-2025.)
And we are about to see those first driverless cars soon. Most top executives at the major car companies have stated in interviews that we should expect to see their first autonomous cars by at least 2020.
Even Uber is getting in on it. Uber CEO Travis Kalanick tweeted last year that he expects the company’s fleet of vehicles to be driverless by 2030. He even said that the service will be so cheap that it will make car ownership obsolete. (Source: “Uber’s Plan for Self-Driving Cars Bigger Than Its Taxi Disruption,” Mobility Lab, August 18, 2015; http://mobilitylab.org/2015/08/18/ubers-plan-for-self-driving-cars-bigger-than-its-taxi-disruption/.)
Of course, every one of these driverless cars will need a non-human brain behind the wheel to drive the thing. Enter NVIDIA.
NVIDIA is already a key supplier of processor chips that power infotainment and navigation systems in cars from partners like Volkswagen AG (ETR:VOW3), Tesla, and BMW (ETR:BMW) among a host of others.
Today, NVIDIA technology is already inside about eight million cars on the road. In fact, NVIDIA powers that 17-inch touchscreen you see in Tesla vehicles.
But NVIDIA is also aiming to become the leader in self-driving cars. 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, LiDar, radar, and ultrasonic sensors. The processor takes in all that information and decides what the car’s next move is. (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) will already be using the DRIVE PX 2 to power a fleet of 100 self-driving SUVs in the company’s self-driving pilot program.
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 March 3, 2016.)
NVIDIA CEO Jen-Hsun 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; http://www.bloomberg.com/news/articles/2013-06-12/nvidia-ceo-sees-automotive-business-growing-to-1-billion.)
The Bottom Line on NVDA Stock
NVIDIA’s senior director of automotive, Danny Shapiro, has said that the company expects to be behind the steering wheel of another 25 million cars over the next four years. (Source: “The Unlikely Secret Making Cars Much Smarter,” Time, October 21, 2015; http://time.com/4080008/nvidia-car-driving/.)
If you’re looking to capture that growth with a leading-edge tech company, you might want to take a look at NVDA stock.