NVIDIA (NASDAQ:NVDA) reported powerful fiscal second-quarter 2018 results on Aug. 10. The graphics-chip specialist's revenue jumped 56%, earnings per share rocketed 124%, and adjusted EPS soared 91%. Revenue and earnings breezed by Wall Street's expectations.
There was a wealth of information covered on the analyst conference call following the earnings release. One of the best gems involved CEO Jensen Huang's outlining how the company views the road map for growth from autonomous vehicles.
NVIDIA's road map for growth from driverless cars
From Huang's remarks:
For this year and next, what you should see is development partnerships that we have with a growing number of car companies, and they're reflected in our e-projects, development systems and purchasing of our AI supercomputers like DGX. ...
Starting next year, you're going to start to see robot taxis start to come to the road. We're working with a handful, maybe, I guess, about six or seven really exciting robot taxi projects around the world. And you could see them start to go into prototype or beta testing starting now. And then, next year, you'll see a lot more of them. And starting 2019, you'll see them going to real commercial services. And so those are robot taxis, what some in the industry call Level 5s, basically driverless cars.
And then the fully autonomous ... branded cars will start hitting ... around 2020 and 2021, OK?
NVIDIA began in the the spring of 2016 to profit from the transitioning toward self-driving vehicles when it started shipping its DRIVE PX 2 AI (artificial intelligence) car platform. This is a supercomputer for processing and interpreting all the data taken in by the various sensors about the surroundings of semi-autonomous and fully autonomous vehicles.
NVIDIA's driverless-car partnerships
On the first-quarter earnings call in May, CFO Colette Kress said: "Since our DRIVE PX 2 AI car platform began shipping just one year ago, more than 225 car and truck makers, suppliers, research organizations, and start-ups have begun developing with it." Moreover, NVIDIA has inked several partnerships for the use of the platform in vehicles that are already on the market or are slated to come to market within the next five years:
- Tesla: In October, the electric-vehicle maker began using DRIVE PX 2 to power its Autopilot on all new Model S and Model X vehicles, and its more affordable Model 3, which began shipping in July, is similarly equipped.
- Volkswagen's Audi: In January at the Consumer Electronics Show (CES) 2017, NVIDIA and Audi announced their collaboration to put advanced AI cars on the road starting in 2020. In July, Audi unveiled its new 2018 A8, which is the world's first Level 3 (we'll get to Levels in a moment) autonomous car to go into production.
- Daimler's Mercedes-Benz: This partnership to bring a NVIDIA AI-powered Mercedes car to market was also announced at CES 2017.
- Toyota: In May, NVIDIA announced that the giant automaker will use the platform to power its autonomous driving systems in vehicles planned for market introduction within the next five years.
- Volvo: In June, the Swedish auto maker and Swedish auto supplier Autoliv announced they're teaming with NVIDIA to make production vehicles built on the DRIVE PX 2 platform by 2021.
- Baidu: In July, the Chinese search engine giant announced that it's adopting DRIVE PX 2 for its autonomous vehicle initiative and will also use the platform in developing self-driving cars with major Chinese automakers.
On the Q1 earnings call, Kress said NVIDIA expected its DRIVE PX 2 platform to be capable of delivering Level 3 autonomy for cars, trucks, and shuttles by the end of the year, and Level 4 autonomy by the end of 2018. (Level 3 involves a moderate amount of automation in which an automated driving system monitors the driving environment. Level 4 involves a high-level of automation, and is just one step away from the fully autonomous level.) The company delivered on Level 3, as evidenced by Audi's recent unveiling of its 2018 A8.
NVIDIA's auto platform growth is poised to accelerate
In the second quarter, NVIDIA's auto platform's revenue grew 19% year over year to $142 million, accounting for just 6.4% of its total revenue of $2.23 billion. So auto is a quite small part of the company's business. However, thanks to the company's numerous autonomous vehicle partnerships discussed above -- and likely robot-taxi partnerships on the near-term horizon -- the auto platform appears on the cusp of a strong growth trajectory.