Nvidia’s next move is to hit the road
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Nov 22 (Reuters Breakingviews) -When Nvidia NVDA.O posted third-quarter earnings on Wednesday, all eyes were on the $3.5 trillion chipmaker’s data center unit. Boosted by ravenous demand from the likes of Microsoft MSFT.O or Meta Platforms META.O, who stuff its graphics processors into server farms training artificial intelligence, the segment accounted for nearly 90% of the company’s $35 billion of revenue. At a mere 1% of revenue, Nvidia’s automotive unit is comparatively easy to overlook. Yet it grew 72% year-over-year, similar to the pace at rival Qualcomm QCOM.O. It may become a crucial diversifier for Nvidia, lessening its dependence on the whims of a few technology titans.
While vehicles are still mostly made of steel, the silicon inside increasingly differentiates them. Flashy entertainment and navigation systems were the early opportunities for chipmakers. Electric vehicles add new, complex systems dependent on semiconductors. Self-driving features, pushed by Tesla TSLA.O, Waymo and others, require yet more. The value of chips built into the average car should rise to $1,400 by 2028, according to S&P Global Mobility, from around $500 in 2020. Assume 100 million vehicles are sold worldwide by then, and that’s an over $140 billion market.
Others are chasing the prize, too. Fellow chipmaker Qualcomm reaped $899 million of automotive revenue in its most recent quarter. While Nvidia boss Jensen Huang can offer graphics and AI chops to power infotainment systems and autonomous driving, Qualcomm’s background in low-power mobile chips gives it an advantage in wireless connectivity and general processing grunt. In October, it announced a partnership with Alphabet-owned GOOGL.O Google that integrates its silicon with the Android Automotive car operating system. Mobileye Global MBLY.O, backed by rival Intel INTC.O, is trying to parlay strength in camera systems into an equal position in full-self-driving.
Each company could use a shiny new market. Nvidia depends on the capital budgets of a few big companies: its top three customers account for more than a third of revenue. Qualcomm, meanwhile, could use growth away from the mature mobile phone market.
Leaders like Tesla may try to cut in with their own in-house systems, but as high-tech features become the norm, others will need an off-the-shelf solution. More importantly, self-driving is a crucial step to applying AI to the physical world. Developments here will probably be useful in robots and other devices.
Such futuristic opportunities, while potentially gigantic, are a long way off. But autonomous cars are really happening, and might even get a speed boost from President-elect Trump’s deregulatory penchant. Nvidia’s next move is to hit the road.
Follow @rob_cyran on X
CONTEXT NEWS
Nvidia said on Nov. 20 that it generated automotive revenue of $449 million in the third quarter, an increase of 72% from the same period last year. Total revenue was $35 billion.
Qualcomm generated automotive revenue of $899 million when it reported quarterly results on Nov. 4, an increase of 68% from the same period a year ago. Total revenue was $10.2 billion.
Mobileye Global said on Oct. 31 that third-quarter revenue declined 8% from the same quarter a year ago, to $486 million.
Nvidia puts pedal to metal for auto revenue https://reut.rs/3Oksdjx
Editing by Jonathan Guilford and Pranav Kiran
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.