Here’s Why Nvidia Is Banking on the Auto Industry

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Nvidia (NASDAQ:NVDA) is banking on the automotive industry’s continued interested in the company’s Tegra processor, as more high-tech equipment is being built into vehicles as a standard feature.

The company’s Chief Executive Officer Jen-Hsun Huang is predicting that the company’s automotive business will continue to double each year to eventually reach $1 billion. While some believe this estimate is a bit optimistic, Nvidia needs the business as PC sales continue to fall. Huang did not give a time frame in which he expected the $1 billion mark to be reached.

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“Until now, it’s been quite slow,” Huang said. “It’s taken us about seven years to build a $100 million business. Now it’s doubling every year.”

The Tegra processor is already used in Volkswagon Audi and Tesla (NASDAQ:TSLA) vehicles, and about 30 more models will begin using the processor in the next two to three years. Nvidia’s “infotainment” chips will start being used in less expensive automobiles as consumers begin to demand features similar to their smartphones in their vehicles.

Nvidia also recently introduced a handheld gaming device with the Tegra processor called Shield. Shield runs on Google’s (NASDAQ:GOOG) mobile operating system Android, and was created with the intention of increasing the use of games that run on Tegra, which will hopefully spur the sales of smartphones and other devices that use the chip. Nvidia showed off an advanced prototype of the device at E3, and it has gotten good reviews from gamers thus far, although some have questioned the $350 price tag.

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Nvidia needs to find success in diversification if it’s expected to compete with rivals like Intel (NASDAQ:INTC) in what some have called a ‘post-PC’ world. While the company’s automotive business may not continue to double each year as Huang predicts, there’s no denying the auto industry’s insatiable desire for new gadgets and as consumers become increasingly attached to their smartphones, it’s likely they will start expecting similarly sophisticated computers in their cars as well.

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