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Could Automotive Be Nvidia’s Next Growth Driver?

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Automotive: Nvidia’s next breakthrough market 

Earlier in this series, we saw that Nvidia (NVDA) is finally seeing the result of its years of efforts in bringing GPU (graphics processing units) to AI (artificial intelligence). The Data Center segment has grown to become Nvidia’s second-largest segment after the Gaming segment.

Another upcoming segment is Automotive, in which Nvidia is still developing autonomous cars. This segment could grow once self-driving cars hit the road. The segment has started seeing the first signs of its efforts materializing, as it secured orders from Tesla (TSLA) for its DRIVE PX 2 open AI car computing platform.

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Nvidia’s automotive revenue

In fiscal 3Q17, revenue from Nvidia’s Automotive segment rose 61% YoY (year-over-year) to $127 million, accounting for 6.4% of the company’s revenue. The revenue was largely driven by demand for car infotainment products.

The company has developed an integrated AI platform, DRIVE PX 2, which can be scaled from a single SoC (system-on-chip) for automated highway driving to multiple SoCs for fully autonomous driving. The company has been testing this platform with multiple automakers and has won its first order from Tesla.

Nvidia’s DRIVE PX 2 platform would be featured in Tesla’s Model S, Model X, and the upcoming Model 3 cars. This means the DRIVE PX 2 platform could start contributing toward Nvidia’s earnings starting in fiscal 4Q17, driving its Automotive segment’s revenue to new highs.

Nvidia’s efforts in the automotive space

Nvidia (NVDA) has collaborated with China’s Baidu (BIDU) and the Netherlands’s car navigation technology provider TomTom to develop a cloud-to-car HD mapping system. Nvidia is also developing Xavier, the successor of DRIVE PX 2 platform.

The 8-core ARM 64-based processor would house 7 billion transistors on one chip, perform 20 trillion operations per second, and support dual 8K HDR (high dynamic-range) video recording—all with just 20 watts of power.

Professional visualization

While things have been hot for the Automotive segment, Nvidia’s ProV (Professional Visualization) segment has been a little slow. The YoY growth slowed from a record high of 21.6% in fiscal 2Q17 to just 9% in fiscal 3Q17.

The demand is slowly picking up as NVDA receives interest from a variety of businesses, such as digital entertainment and automotive companies, as well as architectural, engineering, and construction companies.

As more industries adopt VR–AR (virtual–augmented reality), the ProV segment’s revenue could grow. It is difficult to predict how the segment could perform in the near future, as the demand is directly proportional to the adoption of VR–AR.

Next, we’ll see how much cash these four high-growth segments are earning for the company.

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