NVIDIA's Automotive AI Partnerships Are Incremental Amid Data-Center Overvaluation

What happened

NVIDIA is partnering with auto suppliers to reignite the self-driving car push, betting on AI and collaboration after industry failures and delays. This news highlights NVIDIA's strategy to expand its AI ecosystem into automotive, a segment that contributed only $1.7 billion in FY2025, dwarfed by the $115.2 billion data-center business. The DeepValue report emphasizes NVIDIA's stretched valuation at $188, with a 'POTENTIAL SELL' rating due to data-center concentration, hyperscaler competition, and export-control risks. Automotive initiatives, while aligning with NVIDIA's full-stack AI expertise, do not address the core overvaluation or margin normalization concerns outlined in the report. Thus, this partnership is a minor diversification effort unlikely to impact near-term financials or alter the investment thesis.

Implication

The partnerships underscore NVIDIA's ambition to monetize AI beyond data-centers, potentially opening a long-term growth avenue in autonomous vehicles. However, automotive revenue remains negligible compared to the data-center segment, which drives over 88% of sales and faces intense competitive and regulatory pressures. Investors should prioritize monitoring data-center growth and margins, as the report's bear case of $130 hinges on hyperscaler shifts and margin compression, unaffected by automotive developments. This news reinforces that NVIDIA's stock fate is tied to AI hardware cycles, not niche expansions, with the base case valuation of $185 already pricing in moderate growth. Therefore, no adjustment to the cautious stance is warranted; maintain focus on trimming above $215 and seeking entry near $160 for better risk compensation.

Thesis delta

The core investment thesis remains unchanged: NVIDIA is overvalued with high data-center concentration and cyclical risks. Automotive partnerships are too small to shift financial projections or alter the 'POTENTIAL SELL' rating, as they don't address key threats like margin normalization or competition. This news merely confirms strategic diversification efforts but reinforces the need for discipline in position sizing amid elevated valuations.