The NVIDIA (NASDAQ:NVDA) juggernaut continues to outperform as the graphics card specialist topped Wall Street expectations once again with a terrific showing in the fourth quarter of fiscal 2018. The company reported a steep rise in its revenue and earnings, thanks mainly to a massive year-over-year jump in its data center and gaming businesses.

What's more, NVIDIA expects stronger growth in the current quarter, forecasting a 50% year-over-year increase in revenue, while net income could jump close to 82%. So the company seems on target to keep up its outstanding growth rate. But a closer look at the latest report indicates that there's one area proving to be a concern.

Person reading a book inside a self-driving car.

Image Source: Getty Images.

Automotive growth has struggled

The hype around NVIDIA's self-driving car venture has failed to translate into revenue growth. The company reported $132 million in automotive revenue last quarter, an increase of just 3% from the year-ago quarter. In fact, the automotive business is now just a small part of NVIDIA's huge empire, supplying just 4.5% of the top line.

This raises red flags at a time when the race to develop self-driving cars is intensifying, indicating that NVIDIA is probably losing the early advantage it established by landing marquee customers such as Tesla. What's even more surprising is that NVIDIA claims to have a solid ecosystem of 225 partners using its AI-enabled platforms for self-driving cars.

But all these partnerships haven't translated into any material gains for NVIDIA so far, bringing the company's automotive business to a point of stagnation. As it turns out, the company blames a change in business strategy as the reason behind its automotive woes.

NVIDIA CFO Colette Kress pointed out over the recent conference call that the company is pivoting to a new sales model in the automotive space, moving away from vehicle infotainment systems, which are becoming commoditized. Instead, it's focusing on "next-generation AI cockpits systems and complete top-to-bottom self-driving vehicle platforms built on NVIDIA hardware and software."

But will this help revive NVIDIA's automotive business?

The road ahead

NVIDIA remains confident about its automotive growth in the long run despite the short-term hiccups. As already mentioned, the company has an extensive ecosystem of automotive partners using its solutions for their driverless-car ambitions, and they should start contributing to NVIDIA's growth in the next few years.

CEO Jensen Huang believes that we will start seeing cars with self-driving capability on roads from late 2019, with the market hitting critical mass in 2020. By 2022, Huang believes, almost every car being made will have such capabilities.

This could be a big deal for NVIDIA, as a car with autonomous capabilities could bring anywhere between $500 and $1,000 in revenue for the company. On the other hand, a robotaxi that doesn't require a human driver could bring thousands of dollars in revenue, according to Huang.

The good news is that NVIDIA is aggressively pursuing this market as evident from its recent product development moves and partnerships. Late last year, the company revealed a new self-driving platform -- the DRIVE PX Pegasus -- that's 10 times more powerful than its predecessor.

NVIDIA had clearly stated that it's going after the robotaxi market with this new chip, targeting the massive ridesharing space. The chipmaker has struck deals with key players to deploy self-driving taxis based on its Pegasus platform, including NuTonomy and Optimus Ride.

In all, there are at least 25 companies developing driverless cars based on Pegasus, though it is NVIDIA's latest deal with Uber that could give it a big boost in the long run. In January, Uber announced that it will be using NVIDIA's AI-enabled self-driving car technology in its fleet of driverless cars and trucks.

Uber is among the leading providers of ridesharing services across the globe, and it's aggressively working to automate its fleet. For instance, in November last year, Uber announced plans to buy 24,000 cars from Volvo from 2019 to 2021 that will be outfitted with autonomous technology. This is in line with NVIDIA's timeline for deployment of self-driving cars as mentioned earlier.

So NVIDIA investors shouldn't lose hope just yet as its automotive business could recover next year when deployments begin. But at the same time, the graphics specialist needs to keep a close watch on rival chipmaker Intel's moves in autonomous cars. The latter looks well placed to begin monetizing its automotive technology thanks to its Waymo-Fiat-BMW partnership, so NVIDIA will have to work hard to stay ahead and keep hold of its clients to ward off competition.

Harsh Chauhan has no position in any of the 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.