CES 2017: NVIDIA To Up Its Game In AI & Driverless Cars

The technology sector is in focus this week with CES 2017 set to start today and run through this weekend. It is an annual technology tradeshow conducted by the Consumer Technology Association every year in January in Las Vegas.

However, the tradeshow is unofficially underway from Wednesday evening with NVIDIA Corporation’s NVDA Chief Executive Officer (CEO) Jen-Hsun Huang delivering the ‘Prime Keynote’. Although NVIDIA has done keynotes for several years, this was the first time it was given the opportunity to deliver the ‘Prime Keynote’. Microsoft Corporation MSFT and Intel Corporation INTC have done it for years in the past.

It’s All About Artificial Intelligence & Autonomous Cars

Given the opportunity, NVIDIA’s Jen-Hsun didn’t disappoint the approximately 165,000 visitors at the show. At the event, the CEO announced two important collaborations – with HERE and ZENRIN – that will expand the Live Map capabilities of autonomous vehicles.

Apart from this, the company announced an extension of its decade-long partnership with Audi. The two companies have now decided to put advanced AI cars on the road starting 2020.

At the event, dressed in his signature leather jacket and jeans, Jen-Hsun described how the graphic chips built by his company are taking artificial intelligence (AI) and self-driving cars technologies to new highs.

It should be noted that NVIDIA forayed into autonomous vehicle and other automotive electronics space in 2015 by launching a computer vision system at the CES. It hasn’t looked back since then and has been continuously bringing new and more advanced technologies in the space.

At the beginning of 2016, NVIDIA launched DRIVE PX 2 – the world’s most powerful engine for in-vehicle AI. In Sep 2016, the graphic chip behemoth unveiled a new AI supercomputer chip designed for self-driving cars called Xavier at its GPU Technology Conference (GTC) in Amsterdam.

With its sustained focus on developing new and more advanced AI technologies for self-diving cars, we believe that the company is well poised to become a leading provider of technology for autonomous vehicles. Estimates provided by various research firms further encourage us about NVIDIA’s growth prospects in the space.

According to data available from BI intelligence, 10 million self driving cars will be on the road by 2020. Per Statista, the market for fully autonomous vehicles will grow to almost $6 billion while partially autonomous vehicles market will reach $36 billion by 2025. According to Boston Consulting Group estimates, the autonomous car market will be worth $42 billion by 2025 and $77 billion by 2035.

Other Key Picks from the Event

During the presentation, Jen-Hsun launched GeForce NOW service, through which one can rent high-performance NVIDIA Pascal gaming computer. The service will be connected through cloud data centers and will turn the consumer’s less-powerful PC and Mac computers to GeForce GTX 1080 PCs.

Apart from this, the company introduced SHIELD TV, a video streaming box with $199 price tag. The device, according to the company, will deliver unmatched performance in providing experiences like gaming, streaming and AI integration.

Bottom Line

NVIDIA continues to be the world’s biggest graphic processing hardware provider for PCs since the past several decades. The company’s efforts toward autonomous vehicle and the AI segment shows that it intends to be the largest player in the self-driving and machine learning arena too. Furthermore, by expanding its business avenues, the company will be able to reduce its dependency on the PC industry, which is currently declining.

NVIDIA remains one of the best performers in the semiconductor space. The stock has been clocking solid returns since the beginning of 2016 and has gained 231.1% in the last one year, outperforming the Zacks categorized Semiconductor-General industry’s return of just about 34.9%.

Given the accelerated momentum in gaming, datacenter and automotive technology, we believe that this Zacks Rank #1 (Strong Buy) stock with a long-term EPS growth estimate of 10.3% will continue to rally. You can see the complete list of today’s Zacks #1 Rank stocks here.

Many will argue that NVIDIA with its hefty forward P/E valuation of 43.0x compared with the sub-industry average of 17.2x is a risky bet. We beg to differ as hefty valuations and increasing share prices do not necessarily imply that the stock does not have much upside potential left.

The stock has grabbed the spotlight with striking performances on the back of solid earnings results and strong growth projections. Keeping this in mind, we believe investing in this stock will yield strong returns for your portfolio in the short term.

Furthermore, with its sustained efforts toward attaining robust position in several emerging industries such as AI, deep learning and driverless cars industry, NVIDIA has outpaced other competitors in the space such as Intel Corp. and STMicroelectronics STM in terms of growth.

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