By 2020, BI Intelligence estimates there will be 10 million self-driving cars on the road, and that number falls on the conservative side of some analysts' estimates. Sensing the potential, a wide array of automotive and technology companies are moving headlong into a driverless-car "arms race."
Although there are plenty of companies worthy of analysis, here we'll focus on the autonomous-vehicle efforts at work at two technology companies -- Baidu (NASDAQ:BIDU) and NVIDIA (NASDAQ:NVDA). Let's dive deeper into two companies leading the way in driverless cars.
Chinese search giant Baidu is well known for its aggressive investment spending over the past several years, a strategy that I support but which has weighed on the company's near-term margin and share price. In perhaps its most ambitious goal to date, Baidu has said it hopes to have its internally developed driverless cars on Chinese roads by 2018, though probably in semi-contained areas such as airport park loops.
Even if it doesn't meet that deadline, Baidu remains well situated to benefit from the rise in self-driving cars. Not only is China the world's most populous country, but it's also the world's largest automotive market, with 23.9 million autos sold last year. Of course, the company will have to compete with global rivals, both tech and automotive, that are all vying for leadership positions in this market.
Complicating matters somewhat, Baidu recently lost its chief scientist, Andrew Ng, whose artificial-intelligence research efforts many saw as critical to getting Baidu's driverless-car ambitions off the ground. However, the company's research efforts have grown from nothing to employing roughly 1,300 people since 2014, and its now-established body of intellectual-capital and subject-matter experts should help Baidu remain a force in self-driving cars as trends continue to unfold.
The largest news to come from the semiconductor market this year has been Intel's (NASDAQ:INTC) $15.3 billion purchase of Mobileye. The deal was a shot across NVIDIA's bow that Intel intends to become a major player in the self-driving-car space as well. However, Intel's Mobileye deal distracted from several impressive announcements that reiterate NVIDIA's strength as a leading provider of autonomous-vehicle technology.
Two weeks ago, NVIDIA announced that it will partner with leading car-part maker Bosch to create an in-car artificial-intelligence supercomputer. The deal will place NVIDIA's forthcoming Xavier system-on-a-chip into in-car hardware manufactured by Bosch, a deal both companies' executives believe will help accelerate the adoption of mass-market autonomous vehicles. According to NVIDIA CEO Jen-Hsun Huang, this partnership will allow NVIDIA to provide turnkey solutions for Level 3 self-driving -- defined as semi-autonomous, whereby a driver can still use the controls if needed -- by the end of 2017. Level 4 autonomous driving -- involving systems-controlled driving in all situations -- would be ready in 2018. The company also announced that it has partnered with commercial-truck manufacturer PACCAR to integrate NVIDIA's self-driving chips into its production vehicles.
The commercial opportunity is impressive. NVIDIA noted that analysts think 150 million automobiles with various levels of self-driving capabilities will be deployed by 2025, far more than the BI Intelligence estimates. In touting its PACCAR deal, NVIDIA also noted that roughly 300 million commercial trucks operate worldwide. With Intel's purchase of Mobileye, which also has partnerships with many automakers and suppliers, the battle lines for dominance in the self-driving-car space appear to be hardening. Thankfully for investors in either Intel or NVIDIA, the market for autonomous vehicles appears to be large enough to provide plenty of profits for both companies.
There are plenty of interesting ways to invest in the rise of driverless cars, but Baidu and NVIDIA are two clear leaders in this increasingly important tech market.