<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="NVIDIA (NASDAQ: NVDA) stock regained its mojo after the company’s second-quarter earnings report wowed Wall Street on Aug. 15. The graphics specialist made all the right noises with respect to its gaming business, which remains its primary source of revenue.” data-reactid=”11″>NVIDIA (NASDAQ: NVDA) stock regained its mojo after the company’s second-quarter earnings report wowed Wall Street on Aug. 15. The graphics specialist made all the right noises with respect to its gaming business, which remains its primary source of revenue.
But the biggest surprise came from the company’s automotive business, which was one of the few bright spots in a quarter when overall revenue and earnings plunged. NVIDIA’s automotive revenue shot up 30% year over year to $209 million, accounting for just over 8% of the company’s nearly $2.6 billion total.
Now, that might not be a huge percentage, but investors shouldn’t discount the potential of the company’s automotive business, because NVIDIA has found a formula to succeed in this fast-growing niche.
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<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="A strategic shift in autonomous vehicle tech is paying off” data-reactid=”26″>A strategic shift in autonomous vehicle tech is paying off
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="NVIDIA's automotive business seemed to be losing traction last year. Despite the initial hype over its numerous autonomous vehicle partnerships, those deals had failed to translate into revenue. In response, the company rethought its strategy, shifting from the commoditized business of supplying the chips for self-driving systems to designing and selling end-to-end systems that integrate both hardware and software.” data-reactid=”27″>NVIDIA’s automotive business seemed to be losing traction last year. Despite the initial hype over its numerous autonomous vehicle partnerships, those deals had failed to translate into revenue. In response, the company rethought its strategy, shifting from the commoditized business of supplying the chips for self-driving systems to designing and selling end-to-end systems that integrate both hardware and software.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As a part of this strategy, NVIDIA unveiled the DRIVE AutoPilot platform in January, calling it the world’s first commercially available Level 2+ autonomous driving platform. Management claimed at the time that it would enable automakers and component suppliers to build Level 2+ autonomous vehicles, and deploy them in real-world conditions as early as 2020.” data-reactid=”28″>As a part of this strategy, NVIDIA unveiled the DRIVE AutoPilot platform in January, calling it the world’s first commercially available Level 2+ autonomous driving platform. Management claimed at the time that it would enable automakers and component suppliers to build Level 2+ autonomous vehicles, and deploy them in real-world conditions as early as 2020.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Automotive component suppliers Continental and ZF wasted no time in tapping this platform to build autonomous driving solutions, and the list of partners has been growing ever since.” data-reactid=”29″>Automotive component suppliers Continental and ZF wasted no time in tapping this platform to build autonomous driving solutions, and the list of partners has been growing ever since.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In the second quarter, Volvo selected the DRIVE platform to "train networks in the data center, test them in simulation, and deploy them in self-driving vehicles." The Swedish automaker plans to use autonomous driving technology across a wide range of applications including public transport, mining, construction, and freight transport.” data-reactid=”30″>In the second quarter, Volvo selected the DRIVE platform to “train networks in the data center, test them in simulation, and deploy them in self-driving vehicles.” The Swedish automaker plans to use autonomous driving technology across a wide range of applications including public transport, mining, construction, and freight transport.
Rising demand for NVIDIA’s artificial-intelligence-enabled cockpit solutions was another catalyst for automotive revenue growth last quarter. Shareholders will appreciate the forecast from TechNavio that the digital cockpit market will clock an annual growth rate of 24% through 2022. Meanwhile, the deployment of artificial intelligence (AI) solutions in the automotive space is expected to grow at 45% a year through 2025, according to third-party research.
NVIDIA has figured out the right strings to pull to tap into the massive opportunity in the autonomous vehicle market and its partnerships are now delivering actual revenue growth.
<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This is just the beginning” data-reactid=”33″>This is just the beginning
Automotive might not be a really big business for the chipmaker yet, but NVIDIA believes that it can pull in huge revenue from this segment in the future, as there could be a $30 billion addressable market opportunity in automotive by 2025.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The company continues to strike partnerships left, right, and center, ensuring that a large number of companies will develop autonomous solutions using the DRIVE platform. NVIDIA says more than 370 companies are using its autonomous vehicle platform, including some big names such as Toyota and Mercedes-Benz.” data-reactid=”35″>The company continues to strike partnerships left, right, and center, ensuring that a large number of companies will develop autonomous solutions using the DRIVE platform. NVIDIA says more than 370 companies are using its autonomous vehicle platform, including some big names such as Toyota and Mercedes-Benz.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="So don't be surprised to see NVIDIA's automotive business accelerate, driving stronger top-line growth and ensuring that it remains one of the top tech stocks.” data-reactid=”36″>So don’t be surprised to see NVIDIA’s automotive business accelerate, driving stronger top-line growth and ensuring that it remains one of the top tech stocks.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="More From The Motley Fool” data-reactid=”37″>More From The Motley Fool
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.” data-reactid=”45″>Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article was originally published on Fool.com” data-reactid=”46″>This article was originally published on Fool.com
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