Driverless Car Technology Could Be the Next Catlyst for Nvidia Stock Investors | Deep Dive Part 6

Added: 2026-05-28

[00:00:00]Nvidia highlighted its partnership with Uber as a next catalyst to develop a next phase of growth for Nvidia's business. In part six of my deep dive into Nvidia stock, we're going to look at some of those catalysts for future growth ahead. I want to thank The Motley Fool for sponsoring this video. Visit fool.com/par >> Nvidia said their partnership with Uber will power the robo-taxi fleet across nearly 30 cities and four continents by 2028. And I've been talking about how driverless car technology could propel the next phase of growth for Nvidia.

[00:00:38]Perhaps not this year and perhaps not next year, but starting in, let's say, what management forecasts by 2028.

[00:00:47]And it doesn't have to be full-on driverless car technology. It can be incremental improvements in driverless technology. For instance, it could be lane changing assistance, parking assistance, emergency braking systems, all of which are being incorporated into nearly every manufacturer of automobiles around the world.

[00:01:11]Consumers have shown a willingness to pay for these features, whether it cost an additional $750 or $2,700 or even $5,700 as some manufacturers are charging for these driverless car features. Tesla is famously charging $100 per month for its driverless technology, even though it's still in supervised driverless technology uh assisting your drive as you go forward in certain conditions, in certain locations.

[00:01:45]And so, as this technology develops, you're going to need a lot more computing if this is going to be available broadly.

[00:01:53]And Nvidia is positioning itself to take advantage as a catalyst. Nvidia keeps talking about how demand for its products remain robust and in fact that at unprecedented levels. And so in order to meet that demand, Nvidia has to procure the inventory. That's the challenging part of Nvidia's business.

[00:02:16]It's not a software company where if demand increases by 10x, it's no problem. People just purchase a software license, the company doesn't need to produce any more product. But for Nvidia and other companies that are selling physical products, it's more difficult to generate that growth and that's partly what's been so impressive with Nvidia is that it's been able to grow its revenue so significantly even though it's selling primarily hardware. So in the first quarter they increased their total supply incluses of inventory and purchase commitments.

[00:02:53]So they're saying we're not immune to supply chain challenges. You know, they're letting investors know just because we've had so much success in recent years doesn't mean that risk is not still there.

[00:03:05]Still even with those risks, they remain confident in their ability to support the growth opportunity ahead. And in fact, I would argue they haven't been producing enough and it could partly be because they can't secure enough inventory.

[00:03:20]Nvidia has been talking about how they remain supply constrained for a couple of years now and if you go into the secondary markets, there's a shortage of Nvidia GPUs at video technology.

[00:03:33]If Nvidia was able to produce, you know, 50% more or 100% more, it wouldn't surprise me if all of that supply gets gobbled up by the industry.

[00:03:45]But Nvidia's taking a more prudent approach increasing supply incrementally while not trying to increase supply too significantly too quickly.

[00:03:58]And those supply demand dynamics have allowed Nvidia to charge premium prices for their products and generate gross profit margins of 75%.

[00:04:11]That's truly impressive. I can't think of any other company that's selling physical products that generates a gross profit margin anywhere near these levels. And so that profitability is leading to record levels of free cash flow. The company generated $50 billion in free cash flow. That's up from $35 billion in the previous quarter. And the company's intention is to prioritize research and development with that money and also make some strategic investments. Which you saw in the most recent quarter, their strategic investments have worked out really, really well. It generated nearly $15 to Uh, I shouldn't say in profit, in gains in the values of those investments in the recent quarter. Even after investing in research and development and strategic investments, they still have a lot of cash left over. And so they're announcing $80 billion in additional authorization to buy back Nvidia's shares.

[00:05:13]It's in addition to the $39 billion that's remaining on their current plan.

[00:05:18]So Nvidia will be a large buyer of their own stock over these next few months and probably over these next few quarters.

[00:05:27]And if their success continues, which I think it will, probably over the next few years they'll spend hundreds of billions of dollars buying back their own stock unless they make a big change in their business model whereby they go from what they currently do, which is outsource their manufacturing.

[00:05:46]Unless they make a big change and decide to bring that manufacturing in-house by either building their own manufacturing facilities or purchasing the manufacturing facilities available through one of the companies that have them available. Unless they make that kind of drastic change with their business model this company is going to have a lot of cash to spend on their buyback and I think they will be doing that going forward. Right, so the next part in this deep dive is coming up on your screen.

[00:06:16]Click that link and let's continue.