The partnership marks the fourth time this year that an automaker has officially partnered with NVIDIA, following Audi, Tesla (NASDAQ:TSLA), Mercedes-Benz, and Toyota.
NVIDIA will work with Volvo to bring its Drive PX 2 supercomputer into some of Volvo's vehicles. The partnership comes just after NVIDIA and Volvo had worked together on a project in Sweden in which Drive PX was used in 100 Volvo XC90 SUVs for self-driving tests.
"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." NVIDIA's founder and CEO Jensen Huang said in a statement.
Part of the partnership involves NVIDIA working with a newly created company called Zenuity, which is a partnership between Swedish automotive safety company Autoliv and Volvo. The goal for all of the companies is to work together to build advanced systems and software for artificially intelligent self-driving cars.
How this expands what NVIDIA is already doing
Tesla announced earlier this year -- after a falling out with Mobileye -- that it would be using NVIDIA's Drive PX 2 computer for its current and upcoming models. NVIDIA's supercomputer is now an integral part of Tesla's Autopilot feature in the Model S, Model X, and the soon-to-be-released Model 3. Tesla CEO Elon Musk said recently that he wants his cars to be able to drive themselves from a parking lot in California to a parking lot in New York by the end of this year, even if it's just a demo for now.
Additionally, NVIDIA took a huge step forward in May when Toyota signed on to use NVIDIA's Drive PX 2 supercomputer as the brains of its AI-powered self-driving cars. That announcement was particularly notable considering that Toyota is Japan's largest automaker.
Audi has also been a collaborator on driverless cars with NVIDIA, and Mercedes-Benz is working on a self-driving project with the chipmaker to bring a version of self-driving vehicles to market by the beginning of 2018.
Fighting rising competition
NVIDIA's self-driving supercomputer is already used or tested by 225 researchers, automakers, and automotive suppliers, and the recent partnerships are certainly solidifying the company's position in the driverless car market. Boston Consulting Group estimates the driverless car market will be worth $77 billion by 2035, and NVIDIA's early moves will likely give it an advantage in the space.
But rival Intel (NASDAQ:INTC) made a huge play in the self-driving vehicle space last year when it announced it was buying the driverless car tech company Mobileye for $15.3 billion. Mobileye made the technology that Tesla used for years in its Autopilot system before switching to NVIDIA.
Intel will use its Mobileye purchase to gain a foothold in the driverless car market and also to sell processors into more vehicles. Mobileye and Intel are already working with BMW on its own driverless car platform and plan to bring fully autonomous vehicles to the road by 2021.
NVIDIA only earns about 7% of its total revenue from its automotive segment right now, but the Volvo news and other partnership announcements this year should be a clear indication to investors that NVIDIA plans to expand this business segment as soon as possible.
NVIDIA currently trades at about 42 times its forward earnings, which means the stock isn't necessarily a bargain right now. But the company has proved that it can take its GPU dominance and apply it to the automotive market. That's giving investors a lot of confidence that there's still more room for NVIDIA to grow profits -- and its share price along with it.
Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia and Tesla. The Motley Fool recommends BMW and Intel. The Motley Fool has a disclosure policy.