Is NVIDIA Losing the Plot in This Critical Market Once Again?

NVIDIA (NASDAQ:NVDA) was supposed to win big from the automotive market, especially self-driving cars. The graphics specialist was an early mover in this space and was enjoying terrific financial success in the automotive market a few years ago, making it one of those tech stocks that could have helped you take advantage of autonomous cars.

But things started changing, and they aren’t as rosy as they used to be.

Image Source: Getty Images.

The auto business takes another hit

The fact that chips are just a commodity meant that NVIDIA’s early-mover advantage in the automotive market didn’t last for long. So the company had to go back to the drawing board and come up with a new strategy to ward off the ever-increasing competition in the market for automotive chips.

The new strategy of selling end-to-end automotive systems to OEMs (original equipment manufacturers) and automakers started paying off earlier this year. NVIDIA’s self-driving platforms started gaining adoption, and its automotive revenue resumed moving north. But the company’s latest results reveal that the automotive business has started losing momentum once again.

Chart showing NVIDIA's auto segment revenue.

Data source: NVIDIA quarterly reports. Chart by author.

NVIDIA’s third-quarter auto revenue dropped nearly 6% year over year. The company blamed the “general industry weakness” for the decline, as well as the fact that its legacy infotainment business has now come to an end. At the same time, NVIDIA management pointed out over the latest earnings conference call that its business with Daimler is getting better. According to CFO Colette Kress: “Our AI cockpit business grew, driven by the continued ramp of the Daimler as they deploy their AI-based infotainment systems across their fleet of Mercedes-Benz vehicles.”

The company also highlighted its partnership…

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