Nvidia’s Jetson TX1 To Expand Tegra Processors’ Reach To A Wider Market

Nvidia’s (NASDAQ:NVDA) focus on addressing the top 30% of the market (mainly those vertical segments where visual computing matters the most) is clearly paying off and has helped it outpace the PC market, where it has always had a significant exposure. The company reported a stellar Q3 2016 on Nov 5th, which was the second consecutive quarter in which Nvidia significantly exceeded its original guidance, despite the continued slowdown in PC sales. (Read Our Q3’16 Earnings Article) The company remains focused on its strategy of creating strong platforms for the gaming, professional visualization, data center, and automotive sectors.

Nvidia’s plan to leverage Tegra to gain a larger footprint in the smartphone and tablet markets didn’t really materialize as planned, and the company exited the market earlier this year. Nevertheless, Nvidia continues to develop new products and platforms built around Tegra processors for a range of devices.

Earlier this week, Nvidia introduced a credit-card sized module (Jetson TX1) that uses the power of machine learning to enable a new generation of smart devices and autonomous machines. Nvidia’s Jetson TX1 is the first embedded computer designed to process deep learning networks, computer software that can learn to recognize objects or interpret information. Essentially, the module will help power millions of next generation devices that can navigate on their own, recognize objects and faces, and become increasingly intelligent through machine learning. Available as a module, Jetson TX1 is also built into a Developer Kit, which enables hobbyists and professionals to develop and test highly advanced autonomous devices.

With 1 teraflops of processing power, Jetson delivers exceptional performance for machine learning, computer vision, GPU computing and graphics, while drawing very little power. Jetson TX1 has uses that range from artificial intelligence-assisted robots, to advanced systems in automobiles, drones and to Internet of Things-connected intelligent machines. Launch partners include the MA Institute of Technology, Kespry, Herta, Percepto and Stereolabs. The Jetson TX1 module will be available in early 2016 at a suggested price of $299 (in quantities of 1,000 or more) from distributors around the world. (Read Nvidia Press Release for more information)

Nvidia believes that machine learning is the next great frontier for GPUs,  both discrete and integrated, and is capitalizing on neural net research that has shown GPUs to be capable of both quickly training and quickly executing neural nets. ^[1] Given its strength in GPUs, this can be an important differentiator for the company. Nvidia’s Drive PX system, a platform for developing auto-pilot capabilities using its latest Maxwell GPU, already uses TX1. Jetson TX1 will enable Nvidia to target a wider group of end-markets.

The company currently derives around 10% of its revenue from Tegra processors, and we estimate the contribution to reach close to 20% in the next six to seven years. Additionally, Nvidia presently earns negative operating margin from this division. As it ramps up production volumes of its Tegra line of graphics chips, we expect Tegra division profit margins to turn positive next year onward.

Our $25 price estimate for Nvidia is at an approximate 15% discount to the current market price. We believe that we have adequately factored in the long-term growth potential of the company.

See our complete analysis for Nvidia

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research

1. Nvidia Announces Jetson TX1 – A Tegra X1 Module & Development Kit, AnandTech, November 10, 2015 [↩]