The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

NVDA Stock Prediction

Summary:

Gaming is still Nvidia’s biggest revenue and profit generator.

On the other hand, the new Audi 8 2017 smart luxury car is prima facie evidence that Nvidia has a long-term winner in self-driving cars.

I do not expect the Auto segment of Nvidia to become a major topline or bottom line contributor for the next three years.

However, the ultra-high valuation of NVDA is partly due to its perceived leadership in self-driving car Artificial Intelligence. Supplying the supercomputers in self-driving cars will make up for Tegra’s lost opportunity in smartphones.

The recent unveiling of the new Audi A8 2018 luxury car convinced me that Nvidia (NVDA) has a bright future in self-driving cars. Don’t get me wrong, I still believe that gaming is and will remain Nvidia’s biggest revenue and profit generator for the next decade. However, the Auto segment of Nvidia will most likely grow exponentially after 3 to 5 years from now. Aside from the partnership with Audi, China’s search engine giant Baidu (BIDU) also picked Nvidia as its long-term collaborator on Artificial Intelligence, cloud computing, and autonomous cars.

The Auto business segment only contributes $126 million per quarter to Nvidia’s topline. Going forward, time will come when self-driving cars becomes mainstream. Once that happens, Nvidia could have a $1 or $2 billion/year revenue stream from supplying infotainment systems and Artificial Intelligence-enhanced computers to self-driving car manufacturers like Audi.

(Source: Andrew Tonner/Nvidia)

Before the Audi A8 2018 was unveiled, Tesla was already using an Nvidia-made onboard computer for its self-driving electric car. Below are some pics of the Nvidia Drive PX computer that’s helping Tesla take early lead in self-driving cars.

(Source: electrek.co)

Nvidia supplied the computers that run the Audi A8 2018’s infotainment system and the Traffic Jam Pilot autonomous driving feature. The Nvidia Drive PX technology is likely behind the Audi A8’s optional ability to self-drive itself during traffic jams, parking, or on highway cruise. It only takes a push of a button to turn on the autonomous driving capability of the Audi A8 2018. A driver can easily turn of this self-driving technology and take manual control of car if he wishes so.

(Source: Nvidia)

I am not privy to just how much Nvidia charges for its Drive PX GPU-based self-driving car computers. I suspect that Audi uses the 3 different variants Nvidia’s Drive PX computers inside its latest luxury car. I am also sure that the margins on computers for self-driving cars are much higher than supplying Tegra chips to smartphone/tablet vendors.

(Source: Nvidia)

The Super Optimism On Nvidia Is Partly Due To Self-Driving Cars

In my book, Nvidia’s early leadership in self-driving Artificial Intelligence will help offset the lost opportunity in smartphones. Nvidia’s Tegra SoC was never fit for the smartphone form factor anyway. Nvidia can use its GPU-based processors instead inside smart cars.

Ten years from now, the economic benefit of supplying three $100-Drive PX computers to 5 million cars could be worth $1.5 billion/year. We are just talking about the self-driving components. Nvidia can also supply the infotainment systems for always-connected/online self-driving cars. There are also the deep learning computer servers from Nvidia that car manufacturers will pay for to continuously monitor their self-driving cars.

I opine that the forthcoming self-driving car revolution is partly why Nvidia is highly valued by investors today. The investing public now has the consensus that Nvidia, not Google (GOOG) or Intel (INTC), has the best end-to-end solution for autonomous driving. The believe that Nvidia has the best AI-enhanced computers, best cloud machine learning platform, and unified sensors monitoring/integration for self-driving cars.

Look at the comparative chart below. NVDA is enjoying much higher valuation than its rivals in self-driving car platform, Google and Intel.

(Source: Morningstar.com)

Conclusion

Nvidia’s high valuation is obviously not only because of its lead in gaming. Investors made massive bets on Nvidia because of its expected future multi-bagger benefits in self-driving cars and Artificial Intelligence. Nvidia is now an all-in-one, one-stop provider of hardware and software solutions for autonomous vehicles.

Yes, the ultra-lofty valuation ratios of Nvidia make it a risky investment. However, I still rate it as a buy. You should buy it if you have the money. I am still holding on to my remaining NVDA shares. I Know First has optimistic algorithmic forecasts for NVDA. I therefore expect Nvidia’s stock to trade higher than $180 within the next 12 months.

I checked the technical indicators of NVDA and StockTA still has an overall bullish trend sentiment for it.

Past I Know First Forecast Success with NVDA

I Know First has made accurate predictions on NVDA in the past, such as its bullish article published on October 25th, 2016. In the article, it was announced that Nvidia (NVDA) will supply the custom CPU/GPU chip for Nintendo’s (NTDOY). The Nintendo Switch is a unique product and it could be an important catalyst for Nvidia. During the one-year period starting on October 25th, 2016 until now (July 18th, 2017), NVDA shares have increased by 132.29% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: NVDA)

This bullish forecast for NVDA was sent to I Know First subscribers on October 25th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.