1 Self-Driving-Car Stock You Need to Look At

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Maxim Integrated Products (NASDAQ: MXIM) is known as a maker of analog circuits that are used in data centers, consumer devices, the industrial market, and more. These analog circuits transfer information in electrical devices that need to connect with other devices. This makes them ideal for deployment in automotive applications where several sensors need to communicate with one another.

Not surprisingly, Maxim's automotive business has shown steady growth over the past few years, thanks to the increasing semiconductor content in cars. In the first quarter of fiscal 2018, the automotive business supplied 20% of the chipmaker's total revenue. By comparison, Maxim's automotive revenue was just 7% of the overall business back in the same quarter of 2014.

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And Maxim's automotive business isn't done growing yet. The company recently struck a partnership with driverless car pioneer NVIDIA (NASDAQ: NVDA), which could catapult its automotive presence to another level.

Just what NVIDIA needs

According to NVIDIA, Maxim's platform gives it what it needs to power its scalable self-driving system. According to Gary Hicok, senior vice president of hardware development at NVIDIA, "The NVIDIA DRIVE AI platform, which is scalable from Super Level 2 to the fully autonomous capabilities of Level 5, requires high-bandwidth camera data transmission and aggregation."

So NVIDIA has decided to go with Maxim to support high levels of automation in driverless cars. Maxim will be supplying its Gigabit Multimedia Serial Link (GMSL) serializer and deserializers to NVIDIA's DRIVE Pegasus and Xavier platforms -- which are capable of delivering Level 4 and Level 5 autonomy in self-driving cars.

This GMSL integrated circuit provides secure, high-bandwidth connectivity in automotive applications such as infotainment systems and advanced driver assistance systems. Maxim claims that GMSL is ideal for powering autonomous cars, because the technology can address low-power requirements of cameras mounted on vehicles, as well as tackle the varying bandwidth of the sensor data flowing through the system.

What's in it for Maxim?

This isn't the first time NVIDIA and Maxim are collaborating in the automotive space. The two chipmakers partnered three years ago when NVIDIA chose Maxim to enable analog connectivity for its DRIVE CX and DRIVE PX platforms.

NVIDIA was getting started in the automotive space back then, generating just $70 million in revenue from this segment. Since then, NVIDIA's automotive revenue has more than doubled thanks to a growing list of partners either using or testing its self-driving platforms, pushing Maxim's automotive revenue higher in the process.

However, this latest partnership could be more fruitful for Maxim as NVIDIA claims that it is now working with more than 225 partners in the automotive space. More importantly, the graphics specialist recently landed some big deals that could improve its standing in this industry.

Uber, for instance, will use NVIDIA's technology to enable autonomy in its fleet of self-driving cars. It recently announced that it will be deploying 24,000 Volvo self-driving SUVs between 2019 and 2021, and it is highly likely that NVIDIA will work with Uber to help these cars drive on their own.

Uber's share of the ride-sharing space in the U.S. is estimated at 77%, and it has a presence across 83 countries. This could result in stronger sales of Maxim's analog circuits as Uber launches more self-driving cars based on NVIDIA's technology.

Additionally, NVIDIA is also working with Toyota and Volkswagen on autonomous driving and artificial-intelligence-enabled features. These two automakers are at the top in global car sales, which means that they can help NVIDIA sell its self-driving platform in huge numbers.

This is great news for Maxim as it looks all set to ride NVIDIA's coattails toward automotive riches. But investors will need to be patient as driverless cars will not boom overnight. A new report from IHS Markit estimates that autonomous car sales will hit 51,000 units annually in 2021, but rise remarkably to 33 million a year in 2040.

With driverless cars becoming big in the long run, Maxim is a good way to buy in and is paying investors to wait with a dividend that yields about 2.5% at the current stock price. The stock trades at a forward price-to-earnings ratio of 20.9, which is lower than the industry average of 26, giving investors another reason to take a hard look at this stock.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.

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