Earlier this week, Nvidia Corp. (NVDA, Financial) announced it has partnered with Volvo AB (OSTO:VOLVA, Financial) to develop advanced systems and software for AI-powered, self-driving cars.
Volvo joins a long list of auto companies that are working with Nvidia, including Tesla (TSLA, Financial), Audi (XTER:NSU, Financial), Daimler AG's Mercedes-Benz (XTER:DAI, Financial), Honda (HMC, Financial) and Toyota (TM, Financial).
In a press release, Volvo President and CEO Hakan Samuelsson said the partnership will speed up the development of its autonomous vehicles.Ă‚
Jensen Huang, the founder and CEO of Nvidia, also commented on the deal, emphasizing the important role artificial intelligence plays in the development of this technology.Ă‚
"We are building on our earlier collaboration with Volvo to create production vehicles that will make driving safer, lead to greener cities and reduce congestion on our roads," Huang said.Ă‚
Nvidia has firmly established its position in the artificial intelligence and deep learning market, and is constantly improving its products. The transportation industry is going through a deep transformational process as big tech majors and auto companies around the world are pushing toward autonomous driving.
But getting the driver out of the car is not an easy job. Technology has to evolve much further from its current state. A smart car will have to constantly analyze its environment, generate a humongous number of data points, process them and then make a decision. Now think of doing all that in a split second.
This process requires a massive amount of computational firepower. That is where artificial intelligence comes in - the space where NVIDIA has been building products like its Drive PX, Driveworks, DGX-1, HD Mapping and advanced driver assistance systems.
The number of auto companies that have lined up to work with Nvidia is a good indication of its strength in this emerging field. The competition is slowly gearing up, but the company has solidly positioned itself in the market with a suite of products auto companies must use if they do not want to develop their own technologies.
Nvidia’s quarterly revenue from the automotive segment has nearly doubled from $71 million in second-quarter 2016 to $140 million in first-quarter 2018. Considering the state of the competition, revenue should continue to increase. As a hyper-growth stock, Nvidia is now trading above 10 times sales. Investors need to be extremely cautious when investing in these stocks as news on developments can cause them to swing wildly in either direction.
Nvidia is a good company, but investors should wait for things to cool down a bit before initiating a position or accumulate the stock over a long period of time.Ă‚
Disclosure: I have no positions in the stock mentioned above, and have no intention of initiating a position in the next 72 hours.
