Since forming its automotive business unit in 2004, Nvidia (NASDAQ:NVDA) has shipped or won future design wins for its processors in more than 20 brands of vehicles across 100-plus models. ^[1] This week, the company announced the debut of its Tegra processor based Visual Computing Module (VCM) with the launch of Tesla Motors (NYSE:TSLA) Model S Electric Sedan.

Based on the same Tegra processor used in smartphones and tablets, Nvidia’s VCM will power the digital dashboard of the vehicle. While one chipset will power graphics for the 12.3 inch LCD display control panel, a second Tegra chipset will run the 17-inch touchscreen infotainment and navigation system, which is believed to be the largest ever in a passenger car. ^[1]

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Integrating a multi-core ARM CPU, Nvidia GeForce GPU and dedicated audio, video and image processors, the Tegra VCM features the world’s first mobile superchip. The processors enable intuitive, interactive and high resolution visuals delivering outstanding 3D graphics and multimedia capabilities.

Tesla’s new electric vehicle promises to raise the bar with higher value, enhanced performance and a greater efficiency while delivering a stunning in-vehicle visual experience, powered by Nvidia’s Tegra chips. The high energy efficiency module by Nvidia provides carmakers a cost-effective way to incorporate into vehicles the advanced technology used by customers in consumer devices like smartphones and tablets.

Nvidia’s Tegra processors have had a phenomenal run so far, with presence in Microsoft’s (NASDAQ:MSFT) new Surface PC tablet (See: Nvidia’s Tegra Processors To Power Microsoft’s New Surface PC Tablet), showcasing the world’s first Windows RT device powered by Tegra at Computex 2012 and the launch of its low cost Kai platform again based on its Tegra chipset. Extending the use of Tegra to the automobile sector has opened yet another revenue stream for the company’s growing mobile computing business.

Nvidia is ramping up production of its Tegra 3 processors as it expects to ship about 25 million processors in 2012, almost double that of its shipments in 2011. ^[2] We believe that Tegra would become the most valuable segment for Nvidia, contributing as high as $2 billion in revenues by the end of our review period.

We have a price estimate of $20.98 for Nvidia, a premium of around 60% to the current market price.

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1. Nvidia Powers Digital Dashboard in New Tesla Motors Electric Sedan, Nvidia Press Release, June 21, 2012 [↩] [↩]
2. Estimated Brisk Tegra3 Sales to Benefit Taiwan’s Contract Supplies, cens.com, Dec 21, 2011 [↩]