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The crowded space of autonomous cars has a new addition. The California Department of Motor Vehicles recently announced that it has  cleared NVIDIA for testing autonomous cars on the roads in California. NVIDIA is joining the likes of Ford, Google, Apple and Tesla in the autonomous car space. However, unlike Apple and Ford, NVIDIA is not so much interested in building an autonomous car, but in providing the computing power and intelligence, "the brain" for these autonomous cars. The company is building autonomous cars only to prove the reliability and competency of its own systems and to improve upon them. According to Boston Consulting Group, the autonomous car market is likely to be a $42 billion market by 2025. NVIDIA is making sure that it gets its chunk of the market share.

NVIDIA has chosen the deep learning neural network approach to develop its autonomous driving capabilities. Instead of writing an algorithm containing a set of rules that will tell the car how to behave in different circumstances, NVIDIA is using actual data from human drivers and letting the cars learn on their own, like any normal human driver. NVIDIA's car, nicknamed "BB8", started its driving lessons in parking lots, before moving onto private streets. Now, with the clearance from the California DMV, BB8 will graduate to the public roads. The deep learning approach being used by NVIDIA requires heavy computing power and that is what its AI-powered supercomputers promise to provide.

Driving The Future

During the CES 2016, NVIDIA launched DRIVE PX 2, the world's first AI driven supercomputer for autonomous cars. The computation capability of PX2 is equivalent to 150 Macbook Pros and the device is just the size of a school lunchbox. But technology has moved on since then. At the first GPU technology conference, NVIDIA launched a new artificial intelligence (AI) computer for self-driving cars, called Xavier. Xavier is a system on chip supercomputer containing 7 billion transistors. Xavier is not only more powerful than DRIVE PX2 (it can do 20 trillion operations per second), it also consumes one-fourth the power.

NVIDIA is partnering with more than 21 automakers including Tesla, Ford and BMW and around 39 automotive technology and software companies. NVIDIA recently announced a partnership with TomTom for developing a cloud-to-car HD mapping solution. NVIDIA is also partnering with Tesla. In August, NVIDIA released Tesla P100 GPU, which can perform deep learning tasks 12 times faster than its predecessor. It sports a whopping 150 billion transistors on a single chip, making P100 the world's largest chip. NVIDIA had made an investment of over $2 billion in researching and developing these chips. These investments are already paying off. During the Q3 earnings call, NVIDIA had this to say on its partnership with Tesla:

".... the Model S, the Model X and upcoming Model 3, feature a new AutoPilot system powered by the NVIDIA DRIVE PX 2 platform and will be capable of fully autonomous operation via future software updates. This system delivers over 40 times the processing power of the previous technology and runs a new neural network for vision, sonar and data processing."

Automotive is the fastest growing segment for NVIDIA, though it currently contributes less than 8% of total revenue. Last quarter, automotive revenue grew by 61% to $127 million. NVIDIA expects this field to be a $6 to $12 billion opportunity. For perspective, in FY 2016 NVIDIA generated revenues of $5 billion.

Competition From Intel

While NVIDIA has a strong lead in the autonomous car industry, Intel (NSDQ:INTC) is quickly catching up. Intel has signed deals worth $1 billion with Mobileye (NYSE:MBLY) and BMW for developing self-driving car technology. Also, Delphi and Mobileye will be using Intel core-i7 to power their self-driving vehicles. They will later shift to even faster processors developed by Intel. Intel is already involved in 30 partnerships for developing autonomous car technology, and the number of partnerships is only likely to grow. However, NVIDIA currently enjoys a significant advantage over Intel.

NVIDIA Stock Is Likely To Continue Its Remarkable Run

The autonomous driving segment is a multi-billion opportunity for NVIDIA and the company is making strong progress. The automotive segment is already NVIDIA's fastest growing segment. The company has signed partnership agreements with multiple car makers including Tesla which is planning to use AutoPilot system powered by the NVIDIA DRIVE PX 2 platform across all its models. The shares of the GPU maker are on a tear, gaining around 180% this year, solidly beating both the market and the sector. And with the strong growth drivers it has, the stock is likely to continue outperforming the market.