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NVIDIA Corporation Autonomous Driving Revenues To Start This Year

NVIDIA Corporation (NASDAQ:NVDA) stock continued to climb on Thursday as analysts raved about the company’s announcements at CES for the fourth consecutive day. The chip maker has certainly made a big splash at the trade show this year, especially for its announcements aimed at the automotive sector. In fact, the first NVIDIA autonomous driving revenues could start flowing in as early as this year, according to analysts.

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New NVIDIA autonomous driving partnerships

In a note to investors this week, Macquarie analyst Srini Pajjuri said that he met with NVIDIA Chief Financial Officer Colette Kress and Investor Relations Director Shawn Simmons at CES. The number of NVIDIA autonomous driving engagements highlighted this year was 320, versus the 250 they talked about last year.

The chip maker revealed a number of new partnerships in the automotive sector this year, including a deal with Volkswagen for an artificial intelligence “co-pilot.” Another NVIDIA autonomous driving win this year is the company’s partnership with drive-sharing firm Uber, and in China, the chip maker is partnering with Baidu, which is also partnering with BlackBerry for autonomous cars.

Management told Pajjuri that the first revenues from their autonomous driving development contracts should start flowing in this year, while they expect to start seeing revenues from “geo-fenced robotaxis” next year. According to the Macquarie analyst, “more meaningful” contributions from Level 4 and Level 5 autonomous driving contracts are expected in 2020.

In his view, the NVIDIA autonomous driving segment seems to be clearly ahead of Intel and Mobileye in terms of engagements. However, he adds that it’s still the early days, and such partnerships aren’t necessarily exclusive.

Impressive execution, but NVIDIA stock is fairly valued

Deutsche Bank analyst Ross Seymore also met with NVIDIA management at CES. He said the chip maker announced the availability of its Drive Xavier system-on-a-chip, which features an eight-core CPU, 512-core Volta GPU, deep learning accelerator, computer vision accelerators, and 8K HDR video processors. Xavier targets Level 3 and Level 4 advanced driver-assistance systems (ADAS), and the company said it’s ten times more power efficient than the previous generation.

Although Seymore believes the chip maker is “executing impressively,” he feels that NVIDIA stock is “valued accordingly” at 33 times calendar year 2019 pro forma earnings per share, excluding cash. However, he added that valuation on its own probably won’t hold back NVIDIA stock as Wall Street continues to revise their estimates upward.

Artificial intelligence in autonomous driving

NVIDIA CEO Jen-Hsun Huang kicked things off at CES earlier this week with an online press conference, and artificial intelligence was one of the areas he focused on. B Riley FBR analyst Craig Ellis agrees with his view that artificial intelligence is revolutionizing the $3 trillion IT industry. Ellis expects AI to be the main differentiator among competitors in most industries by early in the next decade, and of course AI is also a key component of autonomous driving.

Huang believes that self-driving vehicles will revolutionize the $10 trillion transportation industry soon, Ellis added, with the opportunity being a reduction in the 82 million crashes that happen each year, including 1 million deadly accidents. He said he was “pleasantly surprised” with the chip maker’s position early this year, and he reiterated his Buy rating and $270 price target on NVIDIA stock.

On Thursday, NVIDIA stock closed up 0.15% at $224.02.

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