Last month, NVIDIA (NASDAQ:NVDA) joined the big leagues in the development of driverless vehicles. The California Department of Motor Vehicles granted NVIDIA an autonomous vehicle testing permit, which means the company can now take its self-driving vehicle off of private roads and onto public ones.
So why is this news a big deal?
NVIDIA gains automotive validation
NVIDIA will now be counted alongside big-name automakers, including Tesla Motors, Mercedes-Benz, and BMW, technology giants Baidu and Alphabet, and components makers like Bosch and Delphi Automotive who are allowed to test autonomous vehicles in the state.
This is an important development for the company since it is one of the few names on that list whose primary business is not selling cars and related components. Its automotive business is still in the nascent stage as automotive revenue in the third quarter was just over 6% of the top line -- gaming brought in the bulk of sales. The DMV approval in California is a vote of confidence for NVIDIA that will allow it to accelerate the development of its self-driving technology with real-world data.
According to The Verge, NVIDIA has wasted no time unleashing its self-driving car on public roads, incorporating the readings from its test vehicles into its DRIVE PX2 supercomputers for deep learning and artificial intelligence.
NVIDIA can now accelerate its automotive growth
According to NVIDIA, there will be 15 million self-driving cars on the roads, creating a revenue opportunity of $2 billion for the company. These cars will be using self-driving features powered by deep learning, radar inputs, sensors, and processors.
The DRIVE PX2 platform already incorporates all these features. According to the company, "DRIVE PX 2 can understand in real-time what's happening around the vehicle, precisely locate itself on an HD map, and plan a safe path forward. It's the world's most advanced self-driving car platform -- combining deep learning, sensor fusion, and surround vision to change the driving experience."
Additionally, DRIVE PX2 has a scalable architecture. This means that it can either be used in a lower configuration that consumes less power to deploy select autonomous functions, or it can enable full autonomous driving by using multiple DRIVE PX2 platforms.
NVIDIA is testing the DRIVE PX2 platform with more than 80 companies at present and has recorded major customer wins already. Tesla Motors, for instance, is going to use the DRIVE PX2 across its offerings, including the upcoming Model 3. Tesla will be able to achieve full autonomous driving capabilities with the help of NVIDIA technology, as it can process responses based on sonar, vision, and radar inputs.
NVIDIA is also partnering with Baidu to create an open cloud-based computing platform for autonomous cars. NVIDIA will use Baidu mapping technology and cloud services to create an autonomous driving platform with the data generated by the vehicle. The platform can then be used by other autonomous vehicle manufacturers to guide their own fleets based on data gathered by the two companies, according to a report from Forbes.
What's next for the company?
The permit given to NVIDIA by the California DMV to test its self-driving vehicle on public roads will clearly provide a boost to the company's automotive efforts. In November, the company announced its next-generation supercomputer platform for autonomous vehicles -- Xavier. This new platform is expected to replace the existing DRIVE PX2 supercomputer and will be out for testing by the end of 2017.
NVIDIA is not feeding fixed instructions into its autonomous driving software. Instead, it is allowing its deep learning mechanism to observe human drivers and learn from them. This is why NVIDIA's self-driving mechanism is not dependent on the detection of road markings, but it is being taught to study real-life road situations. With that in mind, the opportunity to test its existing vehicles on California roads will help the company accelerate the development of Xavier.
Eventually, NVIDIA will benefit from the multi-billion dollar opportunity in the autonomous vehicle space, as it can gain more customers for its self-driving platform, while the Baidu partnership will open another avenue for monetization.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Baidu, Nvidia, and Tesla Motors. The Motley Fool recommends BMW. The Motley Fool has a disclosure policy.