The Best Way to Benefit From Self Driving Cars

NXP Semiconductors (NXPI) is one of the most diverse chip makers in the semiconductor industry. The company is mainly known for its NFC chips, but it has lot more to offer apart from that. At present stage, the automotive industry is growing at a rapid rate, and NXP Semiconductors and NVIDIA (NVDA) are the two leading firms to take advantage of the gradually rising automotive industry.

I have been bullish on both the stocks, however, in this article, I will be focusing on NXP Semiconductors as I believe the stock has more upside potential than NVIDIA.

NXP Semiconductors has its presence in a lot of growing industries and is gaining more traction.
In the most recent quarter, the revenue generated from the company’s automotive segment accounted for more than one-third of its overall revenue. NXP Semiconductors till now has shipped around 30 million ADAS processors, and still supplies the processor to eight of the ten world’s largest auto manufacturers.

Furthermore, NXP Semiconductors recently publicized its new system named BlueBox. This box includes processors, sensors, software, as well as other components for fully automated driverless cars (level 4 cars which can reach their destination with or without a driver in it), fundamentally permitting auto manufacturers to produce an efficient driverless car.

Apart from this, NXP Semiconductors’ partnership with Freescale has already started paying off, as revenue escalated 51 percent y-o-y to $2.22 billion in the latest reported quarter. Despite merger associated pressure and adjustments, the company still managed to record a non-GAAP gross margin of 50 percent and non-GAAP EPS of $1.14.

NVIDIA is mainly known for its graphics cards business but is also putting in hard efforts toward producing solutions for autonomous vehicles. Earlier this year, NVIDIA introduced its DRIVE PX 2, a second-generation autonomous car platform. NVIDIA’s DRIVE PX 2 is designed in such a way that it collects data from LiDAR, video cameras, and radar etc.

It looks like NVIDIA will eat a major portion of market share in the automotive industry, leaving trivial portions for its rivals. However, NXP Semiconductors will not be affected negatively, as NVIDIA is mainly focused on infotainment systems used in cars, leaving NXP Semiconductors a lot of room for growth.

I think NXP Semiconductors is a great play for investors looking to benefit from the autonomous car market. In addition, the stock is also cheaper as compared to NVIDIA, which is why I think it is the best stock for investors looking to benefit from the growth of self-driving cars.

Published on Jun 2, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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