Another Bull Run in NVIDIA Stock?
Judging by the performance of NVIDIA Corporation (NASDAQ:NVDA) stock, the company must be firing on all cylinders. In the past 12 months—during what was a quite volatile period in the tech sector—NVIDIA stock skyrocketed 130%.
Indeed, NVIDIA’s business has been booming, but there is a new field that the company is about to enter. If it succeeds, NVIDIA’s stock price today could look dirt-cheap.
Let me explain…
In the past several years, the main catalyst behind NVDA stock’s rise was its graphics processing unit (GPU) business. Most recently, the stock got another boost because of the launch of the virtual reality (VR) industry. Since many VR headsets need to be connected to a VR-ready computer, and a powerful graphics card is crucial to build a VR-ready computer, NVIDIA’s graphics card business could see huge potential. Forrester Research estimated that VR headsets in the U.S. would grow from 3.3 million units to 52 million units by 2020. (Source: “Virtual Reality Will Reach 52M Units in the U.S. by 2020,” Forrester Research, May 31, 2016.)
Bullish catalysts don’t end just there. In fact, there is another industry that could provide perhaps even more potential to NVIDIA stock than virtual reality—driverless cars.
You might think that as a chipmaker, NVIDIA’s role in the autonomous car industry is going to be similar to its roles in the PC and VR areas—being a graphics card supplier. This time, however, NVIDIA is taking an entirely different approach: the company is building the entire artificial intelligence (AI) system that’s needed to power driverless cars.
Earlier this year, NVIDIA announced “Drive PX 2”—an autopilot car computer. It uses NVIDIA’s GPUs for 360-degree situational awareness around the car. (Source: “Nvidia Boosts IQ of Self-Driving Cars with World’s First In-Car Artificial Intelligence Supercomputer,” NVIDIA Corporation, January 4, 2016.)
The computer is capable of running 24 trillion deep learning operations per second, which is equivalent to the processing power of 150 “MacBook Pros.” It can handle 12 video-camera inputs, as well as light detection and ranging (LiDAR) technology, radar inputs, and ultrasonic sensors. The computer takes in all that information to determine what the next move is for the car.
Competition is intense in the driverless car industry. Companies in Silicon Valley—Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOG), and Tesla Motors Inc (NASDAQ:TSLA), as well as automotive giants like Ford Motor Company (NYSE:F) and Daimler AG, are all in the race. What advantage does this chipmaker have?
Well, NVIDIA uses a different approach when it comes to teaching the computer how to drive a car. As a matter of fact, NVIDIA is literally teaching the system.
In a file called “End to End Learning for Self-Driving Cars,” NVIDIA showed how the company trained its test cars. To put it simply, NVIDIA used two Drive PX computers and three cameras to watch human drivers for a total of 72 hours. The training took place in several states, on different types of roads, and in different weather conditions. The data captured by the cameras are stored in onboard GPUs, then analyzed and broken into learning steps using a machine learning system called “Torch 7.” (Source: “End to End Learning for Self-Driving Cars,” NVIDIA Corporation, April 25, 2016.)
The result is that the trained system managed to drive autonomously 98% of the time. Moreover, each time a driver intervenes, NVIDIA’s Drive PX computer learns something.
Also note that while many automakers are developing driverless cars as well, some of them might not be direct competitors to NVIDIA. This is because NVIDIA has already partnered with quite a few carmakers to integrate its GPU technology into their infotainment, navigation, digital instrument clusters, and advanced driver-assistance systems.
For instance, Audi’s award-winning infotainment system, “AudiConnect,” is powered by NVIDIA. Tesla’s “Model X” and “Model S” both use NVIDIA “Tegra” to run their 17-inch center consoles. Volvo Cars plans to use NVIDIA’s Drive PX 2—the deep learning-based computer—to power a fleet of 100 “XC90” SUVs in the carmaker’s autonomous car pilot program. (Source: “Featured Automotive Partners,” NVIDIA Corporation, last accessed June 24, 2016.)
Right now, tens of millions of vehicles are being produced worldwide annually. Of course, not all of them are going to be replaced with autonomous vehicles. But given NVIDIA’s already strong presence when it comes to powering vehicles’ onboard systems, the company stands to win when driverless cars become a reality.
The Bottom Line on NVIDIA Stock
NVIDIA stock has already soared as the company dominates gaming and VR. Now, with the development of self-driving cars, NVDA stock could get another round of boosts.