Key Technology Trends on Full Display at CES 2017
We think Intel, Qualcomm, and Nvidia are poised to benefit.
We came away from CES 2017 with greater confidence in the prospects for key technology players such as Intel (INTC), Qualcomm (QCOM), and Nvidia (NVDA). Pre-eminent trends--including 5G, artificial intelligence/deep learning, autonomous vehicles, and virtual reality—that have been exhaustively discussed in theory in recent years were on full display across the premier electronics trade show. We believe investors should not view these burgeoning trends in isolation, but rather as an interconnected tapestry intricately woven with key elements from a host of firms. Given Intel’s expertise in high-powered computing, Qualcomm’s connectivity and mobile chip leadership, and Nvidia’s versatile graphics processing units, we expect all three to benefit immensely from these opportunities. We are maintaining our fair value estimates and moat ratings for these companies. We continue to view the shares of Qualcomm as having an adequate margin of safety, while Nvidia and Intel appear overvalued, albeit to varying degrees.
At a high level, new applications such as autonomous driving have a long list of requirements that can vary from high-powered and energy-efficient chips to overarching regulatory and infrastructure upheavals. As automated vehicles will generate and take in enormous amounts of data to navigate and react instantaneously to abrupt deviations, a futuristic network (5G) that can deliver faster speeds, ultra-low latency, vehicle-to-vehicle connectivity, and reliability is of the utmost importance. Meanwhile, the components in the vehicle itself also must be fit for the task, ranging from basic sensors that identify surroundings to advanced processors capable of almost instantaneously crunching mission-critical data to safely drive a vehicle without human intervention. The data center will also play a pivotal role in this ambitious pursuit. The computational power required to create, simulate, and train self-driving algorithms can only be found in servers accessed by vehicles via the cloud. We believe a successful autonomous vehicle will be the product of an ecosystem of partnerships among an army of firms.
Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.