Nvidia Corporation (NASDAQ:NVDA) is booming. InvestorPlace’s Laura Hoy recently discussed the three reasons Nvidia stock will continue performing in 2018. In doing so, Hoy mentioned a number that hit home why investors should be excited about Nvidia’s future.
That number? 320.
“NVIDIA is partnering with Uber Technologies Inc. and Volkswagen AG (OTC:VLKAY) to develop chips capable of powering driverless technology. However those are just two of the firm’s 320 autonomous driving partners.”
Nvidia Drive is artificial intelligence technology tailored for autonomous driving. It allows for the processing sensor data inside and outside of the car. Many leaders in driverless cars are already using Nvidia Drive.
Thus, with Nvidia Drive, Nvidia has inserted itself into the conversation surrounding the future of the automotive industry.
I do not doubt that 100 years from now, driverless cars will be the only thing on the road. If you’re an Uber driver, you can kiss your contracting gig goodbye.
Options for Driverless Investing
Let’s say, for discussion sake, that you can only own one stock that will benefit from driverless cars and trucks.
Which company and stock would you pick?
There are companies like Volkswagen that will supply the finished product that ends up on the road. Today, there are about 20 automobile companies operating on a global basis that will benefit from the move to driverless cars.
Toyota Motor Corp (ADR) (NYSE:TM) is the world’s largest automaker. You might assume that it would be a safe bet to benefit from driverless cars given its size.
It’s very similar to betting on a 20-horse field at the Belmont Stakes, however. You never know who’s going to make it to the front of the pack at the end of a mile and a quarter.
Or, are you?
There’s the risk that if two or three automobile companies does such a good job producing reliable, well-made driverless cars that the other firms could become extraneous and unnecessary. In that situation, the value of CARZ shares would likely drop.
The second option for perspective driverless tech investors would be suppliers to the car companies.
Again, picking the big winner is like finding a needle in a haystack.
There will be winners and losers from driverless cars and trucks. A big winner could be someone like Harman International Industries Inc (NYSE:HAR) who produces information, entertainment, and communication solutions for cars and trucks. A big loser could be the most prominent supplier of steering wheels. So the odds of correctly selecting one or more stocks that ultimately stand atop the mountain are slim.
The final group of beneficiaries are companies like Uber who will use the driverless technology to reduce their cost of doing business.
Those are companies worth betting on, but again, it’s a needle in a haystack.
Then There’s Nvidia Stock
Yes, you can include Nvidia in that second group. Because Nvidia operates in several different tech markets, however, it’s not dependent on the auto industry for its future livelihood. That’s a great luxury to have.
But back to the 320 autonomous driving partners with whom Nvidia is working.
If driverless cars become everything experts predict they will be, then Nvidia is one of only a few chipmakers in position to capture a big piece of the automotive industry’s business.
When one autonomous driving company flourishes, so does Nvidia. If another goes under, Nvidia can absorb the blow because of how many other partners they have.
Bottom Line on Nvidia Stock
Nvidia’s reach into the autonomous driving market puts it in the lead going around the first turn at Belmont Park. And any of Nvidia’s 320 partners running faster will help Nvidia go faster as well.
Yes, it’s a long race, but if Nvidia hangs in there, it should still be in the lead heading into the backstretch sometime in the next decade.
As of January 9, Nvidia stock is 15% closer to its $350 target, while AMD stock is 4% farther away from its target of $25.
Going forward from 2018 through 2019, autonomous cars will begin to take hold, and Nvidia’s 320 partners will continue to pay dividends for shareholders.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.