Nvidia’s DRIVE PX 2 Platform Gives It A Giant Leap In The Autonomous Car Market

Graphics Processors (GPUs) manufacturer, Nvidia (NASDAQ:NVDA) kick-started the 2016 Consumer Electronics Show (CES) with the launch of DRIVE PX-2, a lunch-box size super-computer for self-driving cars. The automotive segment is the fastest growing sub-segment of Nvidia’s Tegra division, and also the most profitable. The automotive industry is currently undergoing a gradual shift to autonomous cars and Nvidia seems to be at the forefront of the technology. The launch of DRIVE PX 2 further accelerates the company’s race towards autonomous cars.

DRIVE PX 2 is an  autonomous supercomputing platform that processes 24 trillion deep learning operations a second, that is ten times the  performance of the first-generation DRIVE PX. It delivers 8 teraflops of processing power, equivalent to 150 MacBook Pro computers. Volvo is the first automaker to use DRIVE PX 2. The company plans to use Nvidia’s DRIVE PX 2 deep learning-based computing engine to power a fleet of 100 Volvo XC90 SUVs, starting to hit the road next year. (Read Press Release)

Autonomous Cars Can Create A >$40 Billion Market By 2025

Automotive electronics is a large market and is going through a transition  as cars have increased computing capability in both the drive train and the dashboard. Increasingly, dashboard functionality within cars (infotainment system, digital cluster and automatic driver assistance) are being computerized. According to Boston Consultancy Group, vehicles that drive themselves on the freeway or take over in traffic jams may be on the road in large numbers by 2017 and autonomous cars might create a $42 billion market for the technology by 2025. ^[1] Statista estimates that partially autonomous vehicle market will reach $36 billion and the fully autonomous vehicle market $6 billion by 2025. Clearly, the opportunity for growth in this segment is huge.

Nvidia  has been working on building its automotive computing platform for over a decade and is in a strong position to leverage this growth. The company’s automotive platforms remain on a sharp upward trajectory, with almost 8 million cars using Nvidia’s technology at present (up from 4.7 million a year ago) and around 30 million more cars in the pipeline. (Note: These numbers are as of Q2 2016, as the company did not provide updated figures in its Q3 2016 earnings call.)  In addition to its infotainment cockpit business, Nvidia is working with over 50 companies that are developing self driving car technologies, using NVIDIA DRIVE PX. These include car manufacturers, Tier 1 OEMs, start-ups and research institutions. Given the significant technology leap of DRIVE PX 2 over DRIVE PX, this number is likely to be much higher one to two years from now.

Tegra processors currently account for around 10% of Nvidia’s revenue, and we forecast the revenue contribution to increase to around 20% over our review period. At present, Nvidia does not make any profit from its Tegra business, but we expect Tegra Processors EBITDA Margin to turn positive 2016 onward. As it ramps up production volumes of its Tegra line of graphics chips, we expect Nvidia to increase its profit margins. Additionally, the company expects automotive offering to be the fastest growing Tegra division. This will help improve margins in the future as automotive offer higher margins compared to mobile devices.

Our $25 price estimate for Nvidia is at an approximate 20% discount to the current market price.

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. Driverless-Car Global Market Seen Reaching $42 Billion by 2025, Bloomberg, January 9, 2015 [↩]