The self-driving-taxi playing field continues to expand.

Earlier this week, Daimler (DDAIF)  (maker of Mercedes-Benz and Smart) and Bosch teamed up with Nvidia Corp.  (NVDA) to build out a fleet of autonomous taxis.

The two companies plan to use Nvidia's DRIVE Pagasus to fuel this aspiration for self-driving taxis. In April, Daimler and Bosch said the two companies would collaborate in an effort to bring autonomous vehicles to the market within five years. Based on the timing of that statement, it would put those vehicles on the road sometime around April 2023.

This development came as little surprise to me, given that Nvidia powers the all-impressive (and completely gorgeous) Mercedes MBUX, the artificial intelligence infotainment system that's now being introduced to a number of vehicles in its fleet.

Naturally, with Daimler using Nvidia to power its next-generation infotainment system and now teaming up with Bosch to build their autonomous driving system on Nvidia's DRIVE platform, one naturally wonders if Nvidia will power Mercedes autonomous cars for customers, too. That's a reasonable takeaway given how things have played out so far and offers more opportunity for the three companies going forward. 

After the news, I was able to catch up with Danny Shapiro, Nvidia's senior director of automotive, to help give some perspective.

Danny pointed out that Mercedes has been working on this project for a while, as it first needed to completely redesign how these vehicles would look and operate. Because the vehicles will serve as driverless taxis, they don't have a steering wheel or pedals. The car controls all of that on its own. Bringing autonomous driving to vehicles it sells to customers would require a different approach, because there are pedals and a steering wheel.

So Mercedes really does have to have a multi-pronged approach to the whole thing and this is where teaming up with Nvidia could accelerate the timetable. However, Shapiro was very clear that, although the speed of these applications are accelerating thanks to technological advances, speed itself is not the prerogative. Instead, safety is the main driver behind these developments. 

With its DRIVE platform, it's clear that Nvidia is one of, if not the  leader in the autonomous driving movement. While we're still in the early days, the company's DRIVE Pagasus platform can transform vehicles into self-driving navigators. It's roughly the size of a license plate and Shapiro calls it the most energy-efficient solution in the market right now. Its Constellation platform allows automakers and developers to synthetically test their self-driving systems without putting anyone in harm's way.

While Constellation is not yet shipping to customers, it's an important piece to the puzzle that allows Nvidia to provide a "path to development, test and validate in the datacenter where we can virtually drive autonomous vehicles," Shapiro said.

Nvidia's Danny Shapiro
Nvidia's Danny Shapiro

Future Opportunities

Shapiro explained that Nvidia does not build self-driving cars. Instead, it creates the products and solutions that developers need to make autonomous driving a reality. Bosch will integrate the sensors, cameras and other necessary components while Daimler will design and manufacture the vehicles.

Using this approach, the goal is to start testing sometime in the second half of 2019 in a yet-to-be-determined city near Silicon Valley. The goal would be to bring a larger rollout of the service "to urban roads by the beginning of the next decade," according to Daimler. With that language, it could be 2021 or it could be 2023 -- the latter of which fits within that five-year narrative Daimler and Bosch talked about in April.

In any regard, the opportunity could be huge. Some analysts are predicting that Cruise, an asset majority-owned by General Motors Co.  (GM) , could be valued at more than $40 billion by 2030. For reference, that's about 80% of GM's current market cap. Alphabet Inc.  (GOOG) (GOOGL) , which operates Waymo, could see its self-driving taxi arm valued between $119 billion to $180 billion over the next decade. While that's a ways away, imagine if Daimler and Bosch create a unit with an enterprise value eclipsing $40 billion. It's a massive opportunity if they can pull it off.

And let's not forget about Nvidia. Once its DRIVE Constellation platform starts to ship, the floodgates could begin to open. Its Pegasus platform should see further adoption as time goes on too, as each car would need its own platform, regardless of whether it's a self-driving taxi or a personal car with autonomous features and capabilities. 

Shapiro reminded me that Nvidia is building more than a chip to build autonomous driving applications. They are building an ecosystem around the entire technology. Whether that's with Pegasus and Constellation, or through solutions in the cloud and datacenter. This industry is ripe with potential and Nvidia has found a way to put itself squarely in the center of it.

Nvidia and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA or GOOGL? Learn more now.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.

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