NVIDIA Q2 Earnings: Competition Heats Up in GPU Market, What Does It Mean for Autonomous Vehicles?

This Week In The Road to Autonomy Index — For the week of August 21, 2023, The Road to Autonomy Index declined 0.26%, while the S&P 500 returned 0.26%. The Road to Autonomy Index underperformed the S&P 500 by 0.52%.

The top performing stocks in The Road to Autonomy Index this week were Tesla which returned 10.71%, NVIDIA which returned 6.25% and Glencore which returned 2.94%.

On this episode, Grayson Brulte discusses NVIDIA, a The Road to Autonomy Index component company’s fiscal year Q2 2024 earnings, the development of in-house GPU chips by Amazon, Alphabet and Apple and Governor Newsom of California’s support for autonomous trucks.

NVIDIA reported record revenue of $13.51 billion, up 88% from Q1 and up 101% from a year ago. Analysts were expecting revenue of $11.22 billion. NVIDIA beat analyst estimates by $2.29 billion.

Revenue at NVIDIA’s data center business rose 141% to $10.32 billion in the quarter, beating analyst estimates of $7.69 billion by $2.63 billion. With their revenue growth momentum, NVIDIA issued third-quarter revenue (fiscal year Q3 2024) guidance of $16 billion dollars, plus or minus 2%.

During the quarter, NVIDIA returned $3.38 billion to shareholders in the form of 7.5 million shares repurchased for $3.28 billion and cash dividends. Further bolstering their buybacks, NVIDIA announced that the Board of Directors approved an additional $25 billion in share repurchases, without expiration on August 21st.

With a stock that has risen roughly 220% in 2023, why authorize an additional share repurchase now? In our opinion, share buybacks work best when the Board feels that the stock is undervalued. With a stock that has gained roughly 220% YTD along with a P/E of 109, how is the stock currently undervalued?

While NVIDIA smashed headline earnings, automotive revenue slowed to $253 million in the quarter, down 15% quarter-over-quarter, while still up 15% year-over-year. While still an emerging industry, NVIDIA’s autonomous vehicle revenue is poised to grow as several companies depend on the NVIDIA DRIVE Orin SoC for their autonomous driving stack.

Investors are valuing NVIDIA as an AI company because of the company’s dominance in the GPU market. Lurking under the surface are Amazon, Alphabet and Apple all are developing their own in-house GPU chips to compete with NVIDIA at a lower cost. Amazon has deployed their Inferentia and Trainum chips on Amazon Web Services (AWS) for commercial use and Alphabet’s Google has Tensor processing units that are currently available on Google Cloud.

The development of in-house GPUs for datacenter and autonomous driving applications could potentially pose a long-term competitive threat to NVIDIA. Competition in the GPU market is healthy and it will benefit the development and commercialization of autonomous vehicles.

Autonomous vehicles and autonomous trucks are commercializing and the economic benefits that they pose to the economy’s where they are going to operate is immense. Politicians are starting to understand the true economic benefit that autonomy will have on their economies. In California, Governor Newsom’s administration has come out publicly to oppose AB 316, which would effectively ban autonomous trucks in the State of California.

The decision by Governor Newsom was a big one. It’s not just positive for the autonomous trucking companies based in California, but for the entire autonomous trucking industry as a whole. The residents of California will benefit from the lower costs of groceries and goods when autonomous trucks begin operating in California.

The future for the autonomy economy is bright as companies develop GPUs to enable autonomous driving and California begins to open the door to autonomy. Autonomy is good for the economy. Today we are merely at the starting line for what is to come with autonomy and its economic impact on society. We are at the dawn of The Autonomy Economy.

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The Road to Autonomy Index®

The Road to Autonomy Index is an autonomous vehicle index comprised of 38 publicly-traded companies. The Index is a rules-based equity benchmark index that is calculated by Standard and Poor’s Dow Jones Indices. The Index measures the performance of a basket of global companies that are involved in the development and commercialization of autonomous driving technologies.

Included in the Index are companies that are developing autonomous vehicles (self-driving cars), autonomous trucks and off-road specialty vehicles. As well as transportation, technology, industrial and services companies that have identified autonomy as a key component of their growth strategies.