Nvidia’s Latest Partnership Has Long-Term Implications for Lidar Stocks
Nvidia (NASDAQ:NVDA) stock has climbed more than 125% this year. While it’s not the only driver for the stock, its role in the lidar industry has played a key part in its continued success. Thankfully, for those interested in lidar stocks, a recent move by Nvidia shows that things are starting to heat up again for the industry.
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In the battle for lidar dominance, chipmaker Nvidia appears to be the tie that binds the various lidar suppliers together. Its self-driving car platform, Nvidia Drive Hyperion, has become the de facto standard for carmakers.
But NVDA stock isn’t the only name that should be on your radar if you’re looking for lidar stocks to buy.
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Earlier this week, lidar darling Luminar (NASDAQ:LAZR) was the latest to make headlines by joining the Nvidia fold. The DRIVE platform, enabled with Luminar’s technology, will be available for vehicle models starting in 2024.
With this latest announcement, Nvidia now has six lidar sensor vendors — including Baraja, Hesai Technology, Innoviz (NASDAQ:INVZ), Magna (NYSE:MGA) and Ouster (NYSE:OUST) — all developing lidar sensors to run on the Drive platform. Microvision’s (NASDAQ:MVIS) A-Sample lidar is also rumored to have an Nvidia chip inside — although there has been no confirmation by either company.
As frequent InvestorPlace readers know, lidars, or light detection and ranging systems, are laser-based sensors that detect the environment around them. Carmakers see lidar as a key technology to develop self-driving and advanced safety technology. Nvidia’s products provide the computing power for autonomous vehicles. Together, the combination provides a complete package for automakers.
Now, the question you’re probably asking is why does Nvidia’s platform need nine unique lidar sensors? Carmakers aren’t likely to choose all nice companies for commercialization. And that means the lidar industry is ripe for consolidation.
So, what’s going on in lidar? Here’s a closer look at how Nvidia’s involvement in the space might indicate great things to come for some lidar stocks moving forward.
NVDA: Playing the Field
When it comes to lidar, carmakers are playing the field, so to speak. Most self-driving carmakers are experimenting with different sensors. That way, they can modify how many sensors they use, where they put them and test out the different types. Carmakers also use different configurations to test new features and improve safety and self-driving capabilities.
As a result, no carmaker appears locked in with any single lidar supplier. That very sentiment — that decisions are still being made — has also been underscored by our recent conversations with lidar executives, including Innoviz CEO Omer Keilaf and Microvision CEO Sumit Sharma.
It’s clear carmakers are exploring the various lidar technologies on offer. It’s also clear that the lidar players themselves are still working toward a final lidar product. So, by working with multiple lidar suppliers, Nvidia is able to provide carmakers with different plug-in technology solutions the company views as both good enough and scalable.
By aggregating the best lidar solutions to its platform. Nvidia may also be setting the industry up for consolidation. Many industry observers, including the lidar CEOs themselves, have said it’s too difficult for multiple lidar companies to develop technology good enough for mass commercialization. “The market will eventually consolidate. Some sensors are used for reference and ground truth measurement, some for real long term series production,” said Keilaf in a statement to InvestorPlace.
In fact, in our most recent conversation with Microvision, Sharma indicated that cost may ultimately be the single most important factor determining carmakers’ decisions. Having an end-to-end system, instead of various individual technologies (e.g., cameras, sensors or maps), may be the most cost-effective way of making autonomous driving mainstream. This desire for integration seems to have been the motivating factor for computing giant Intel’s (NASDAQ:INTC) decision to acquire Mobileye back in 2017.
Who’s on What Wavelength?
For carmakers, one issue still undecided is which lidar offers the best recipe for performance and price. Right now, it’s unclear whether 905 or 1550 nanometer lidar solutions will prevail. Case in point: Luminar and Innoviz, both of which have been selected by Nvidia. Yet, the lidars use different wavelengths (Luminar uses 1550; Innoviz uses 905).
Each lidar camp has a story to tell for why its technology is superior. For its part, Innoviz provided a strong endorsement for its 905 nm technology. The lidar company’s Q3 earnings call featured a guest appearance by Richard Rau, vice president of sensors, control units and software for BMW (OTCMKTS:BMWYY). Rau stated “specifically the specific IP Innoviz brings to the table clearly tells from my perspective the overall optimization towards the 905 with specifics that Innoviz can provide.”
Luminar, Nvidia’s newest partner, isn’t lacking for high-profile carmaker relationships. Swedish automaker Volvo (OTCMKTS:VLVLY) has already selected the company’s lidar in new vehicles capable of hands-free, eyes-off highway driving beginning in 2022. The partnership also includes Gores Guggenheim’s (NASDAQ:GGPI) upcoming Polestar 3 from Volvo’s new electric-car division as well as a range of Volvo-branded cars and SUVs.
Based on the company’s latest announcement, Nvidia’s vehicle computing platform will begin production with Luminar sensors in 2024. Finally, adding more fuel to the fire, a few weeks ago, the company was the object of speculation as a potential supplier to electric vehicle (EV) upstart Lucid (NASDAQ:LCID).
The Bottom Line on Lidar Stocks
After years of hype, self-driving car technology is finally becoming real. And Nvidia is moving carmakers one step closer to making these technology decisions. As an investor looking at lidar stocks, the tricky part is figuring out which companies are developing partnerships that will result in volume production contracts with carmakers.
Right now, there are no clear answers. But, as carmakers start to demonstrate their preferences, expect to see consolidation in the lidar industry.
Your comments and feedback are always welcome. Let’s continue the discussion. Email me at jmakris@investorplace.com.
On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.
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