Qualcomm (NASDAQ:QCOM) is starting 2020 on a high note, with a strong presence at the annual Consumer Electronics Show (CES) in Las Vegas. As you might expect, QCOM is pushing 5G, and the company made some waves by unveiling the world’s first 5G computer.
But the big news for investors was Monday’s announcement of Snapdragon Ride. Qualcomm is taking on leaders in self-driving car technology like Nvidia (NASDAQ:NVDA) with its own autonomous vehicle platform. QCOM stock saw a 2.8% pop on the news, closing at $88.97 on Tuesday.
It gave a little of that boost back yesterday, but there is no doubt that Snapdragon Ride is good news for QCOM stock.
Snapdragon Ride is a scalable, autonomous vehicle platform. On the technical side, it’s built around modular, multi-core processors and GPUs, and includes AI capability. QCOM designed the platform to be scalable, and it can be deployed in configurations capable of 30 tera operations per second (TOPS) all the way up to 700 TOPS.
Different autonomous driving platforms have differing levels of automation, as defined by the Society of Automotive Engineers (SAE). Those SAE definitions span from Level 0 (completely human controlled) to Level 5 (completely vehicle controlled), and have been adopted by the U.S. government with regards to regulating so-called self-driving vehicles.
At the lower end of autonomy, the Snapdragon Ride platform will support advanced driver-active safety assistance systems such as lane departure warnings and automatic emergency braking. From there Snapdragon Ride can be adjusted to support Level 2+ autonomous features, similar to what Tesla (NASDAQ:TSLA) now offers. These include capabilities such as self-parking and automated driving on highways.
At the higher end, Qualcomm says Snapdragon Ride can handle the intense requirements of Level 4 and Level 5 autonomous driving. A vehicle equipped with Snapdragon Drive could be capable of fully autonomous urban driving, making it a contender for the “robo-taxi” market.
Qualcomm says Snapdragon Ride will be available to automakers in the first half of 2020. The first vehicles employing the technology are expected to be in production by 2023.
Although there is already big competition in the form of Tesla, Nvidia and Intel’s (NASDAQ:INTC) Mobileye, the autonomous car technology market is still very much up for grabs, a positive for QCOM stock owners.
New Business for QCOM
Qualcomm faces many challenges moving forward. Ongoing antitrust issues may end up cutting into the royalties and licensing fees it receives from smartphone manufacturers. And that smartphone market is slowing. 5G rollout will of course result in a sales bump, but that won’t last forever. 5G in laptops is interesting, but it’s not going to save the day for QCOM stock when PC sales continue to be in decline. The company’s efforts in smartwatches have failed to gain traction against the Apple Watch.
Snapdragon Ride represents something QCOM desperately needs: a new line of business in a market that seems set to explode, rather than already mature or in decline. The autonomous vehicle market was worth an estimated $54.3 billion in 2019 and is on track to hit $556.67 billion by 2026. The technology required for entry is costly to develop and requires expertise that most automakers — besides Tesla — lack. That means a huge opportunity for companies that can design an autonomous driving platform that can be deployed and customized by multiple auto manufacturers.
Snapdragon Ride goes far beyond Qualcomm’s existing efforts in automotive technology (semiconductors for telematics and wireless connectivity and infotainment systems). However, with existing customers like General Motors (NYSE:GM) already using QCOM technology in their vehicles, the company has an “in” for pitching Snapdragon Ride.
Potential Impact on QCOM Stock
It goes without saying that Snapdragon Ride could be an important part of the QCOM stock value picture. Qualcomm’s annual revenue in 2019 was $24.27 billion, and if it can secure even a sliver of the $556 billion the autonomous car market is predicted to generate by 2026? It would make a world of difference to the company and their investors in a mature smartphone market.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.