What does NVDA sell? It sells brains. It sells brains that go into machines. One example is a car. But a car is a subset of an autonomous vehicle. A car is thought of as a vehicle that transports humans around on the ground. An autonomous vehicle can be anything that can move around on its own, not just a a box that moves human around.
So what is the brain of an autonomous car worth? Jensen Hwang might know a thing or two have the value of a brain that enables an autonomous car. Here’s what he said during yesterday’s Q&S session of the earnings call:
I think for autonomous vehicle that still have drivers passenger cars, branded cars, ASP anywhere from $500 to $1,000 makes sense. For robot taxies where they are driverless, they are not autonomous vehicles they are actually drivers less vehicles, the ASP will be several $1,000. And in terms of timing, I think that you’re going to see a larger and larger deployment starting this year, and I’m going through next year for sure especially with robust taxies. And then with autonomous vehicles, cars that have autonomous driving capability, automotive driving capability start late 2019, you could see a lot more in 2020 and just almost every creating car by 2022 will have autonomous automatic driving capabilities.
So how much money can NVDA make off of autonomous cars? There are 77 million cars sold be year. If all cars were autonomous then we wouldn’t need as many cars. Let’s cut the annual number in half. Eventually all cars will be fully autonomous. NVDA is working with EVERYBODY…320+ partnerships in the automotive sector. OK is NVDA received $2000 for the brain of each autonomous car that’s 38.5 million brains times $2000 or $77 billion PER YEAR in revenue. That’s the potential addressable market. The real number would be some fraction of that but even so we’re only talking about autonomous cars. There’s still autonomous everything else. Forklifts, all kinds of drones, maybe autonomous pollinators for agriculture, autonomous vehicles to mine asteroids, and who knows what else…Anything that moves and needs its own brain. The potential is enormous. NVDA’s annual revenue is now about $10B.
So at 60%+ gross margins and potential annual revenue of $77B or almost 8x their current revenue, what the potential valuation of NVDA? Can NVDA become the most valuable company in the world? In 10 years it may well be there. So what is a good brain worth?