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About Jim Walker

Jim Walker has been a member since November 8th 2010, and has created 776 posts from scratch.

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How to Spot a Value Trap Investment

Over the years we have often cautioned investors to beware of penny stocks, especially those that have seen better days. While investing in a grand old name in hopes of a recovery it is important to learn how to spot a value trap investment. This issue came up recently when we wondered what was wrong at Kraft Heinz. As bargains become harder to find in an aging bull market there is a temptation to go bottom feeding in search of an investment miracle. Here is some advice about what to watch out for.

 

If you are going to invest in Kraft Heinz today you need to know how to spot a value trap investment.

Kraft Heinz Products

 

Spotting a Value Trap

A couple of years back Bloomberg published a useful article with 12 signs a cheap stock is a value trap.

The historically high price-to-earnings ratios being placed on equities today make cheap stocks even more alluring. That makes sense, but be advised that the market is littered with “value traps” or stocks that look cheap but never substantially rebound.

Any way you cut it, value is profoundly out of favor, and not just in 2017. Although proponents of these investments typically are patient people, the long-term differential is large enough to be worrisome. Over the last 10 years, growth has outperformed value by more than 100 percent in small caps and by 50 percent in large caps.

Thus, knowing how to spot a value trap is doubly important at this time. Here are dozen suggestions from Bloomberg. The ideas are theirs but rewritten by us for the sake of brevity.

Still Troubled at the Top of Its Operating Cycle

The U.S. economy and the vast majority of stocks have long recovered from the 2008 stock market crash and financial crisis. If the company you are looking at is performing poorly in the best of times it may well be a value trap. Something is wrong as is not being fixed or cannot be repaired.

Low Profits but High Management Compensation

When a company falls on hard times it typically puts the screws to management by cutting salaries and tying compensation benefits to performance. When this is not the case, management is milking the company for every last dollar before bailing out. This is a strong sign of the stock being a value trap.

Lack of Fresh Insights

When an industry like the U.S. auto industry is centered in one city or area like Detroit, everyone works with and socializes with like-minded people. But, when fresh ideas are needed this can be a real hindrance and create value traps of otherwise strong companies.

Market Share Continues to Slip

When someone else starts taking market share away from an old stalwart, you need to see them fighting with all that they have to regain that share and succeeding. Otherwise, they have become a value trap.

Too Many Fingers in the Pie

Many times a well-established company has many stakeholders such as labor unions, foundations, or old family control. The goals of these folks may not be consistent with a good return on investment by those who hold their stock. Consider such companies to be value traps until proven otherwise.

Not Managing Capital Effectively

A company that has historically been a cash cow may have gotten by for years by just putting money in the bank instead of reinvesting in R&D, acquisitions, and the like. When this company starts to slip it needs to shift gears or it is a value trap. And, the changes in how they manage capital need to be clearly articulated to investors and need to begin to show results.

Fat and Inefficient Management Structure

It is said that when Sears built the Sears Tower that they took up 22 floors for management, each floor a different level. No one was paying attention to how management was being carried out and no one was making changes. When a company does not upgrade and modernize how it operates on the day by day and decision by decision level, it becomes a value trap because its competitors will outperform it every day of the year.

Unrealistic and Fantasy Management Goals

When a company is in trouble it needs to regroup and it needs to explain those plans to both employees and investors. When management’s new goals are simply unrealistic no good will come of them. You can often see this by looking at old financial statements and the goals articulated in previous years and the fact that nothing useful has happened, ever! This situation is a clear sign that the company is a huge value trap. The better situation is when management promises a little but delivers a lot on a recurring basis.

Too Much Debt

The final nail in the coffin of most struggling companies is that they cannot pay their mounting debts with their dwindling cash flow. No matter how hard they try, how creative they are, and how much they economize, excessive debt is a killer and makes a stock a value trap.

Muddled Thinking and Poor Insight

The so-called strategic vision or the company is all muddled or simply lacking. When management’s plans for the coming years ramble on and repeat themselves, it is time to consider that stock a value trap, absorb your losses, and move on.

Split Attention between CEO and Board Chairman Responsibilities

When it is time to turn around a failing company it takes all of the time and attention that the CEO has. When he is spending a third of the time answering to the board of directors when he or she should be making changes from the ground up that is a sign of impending failure. Turnarounds need the full attention of the CEO or they become and remain value traps.

The Takeover Activists Are Nowhere in Sight

When a company has been mismanaged but has a lot of hidden value, there is always a Carl Icahn or his clone interested. When nobody shows up, that is a clear sign that the company really is a value trap and you should avoid it as well!

How to Spot a Value Trap Investment

The tips provided by Bloomberg are useful in spotting and avoiding a value trap. They all fall into the categories of fundamental analysis and evaluation of intrinsic stock value. While growth stocks have been leading the market in the last few years, there is a definite place for value in your portfolio. The trick is recognizing true and lasting value in an investment by understanding and appreciating how a company makes its money and how it will continue to do so well into the future.

 

How to spot a value trap is to consider the story of Eastman Kodak's rise to dominance and eventual decline.

Eastman Kodak

Is Your Investment Story Profitable?

Successful investors have a story that drives their investment decisions. A prime example is Warren Buffett who notes that the U.S. stock market prospers on the back of a growing U.S. economy. He looks for companies that reliably generate profits year after year and is a disciple of the intrinsic stock value approach to investing as he was, in fact, a student of Benjamin Graham who discovered that approach. So, the man who is perhaps the most successful investor of all time has a simple story that drives his investing. Is your investment story profitable?

Simple Investment Stories

The concept of investment stories came to mind after reading an article posted a couple of years ago by Motif. They noted that simple stories drive markets. The article is a good read as they look at investment themes that dominated investing during various periods and how those themes worked out over the longer haul.

You know that adage, “stocks are sold, not bought”? What often drives stocks are simple, plausible stories. In fact, Nobel-winning economist Robert Shiller has made the case for how both financial markets and economies are heavily influenced by stories.

Investors often call these stories their “investment thesis.”  We at Motif like to call them themes, ideas, trends, or motifs. We believe it is far more intuitive for investors to think this way rather than the traditional investment “style boxes” used by mutual funds or risk premium “factors” favored by academics. For example, “small cap value,” which combines academia’s two favorite factors into a mutual fund style box, doesn’t resonate with most investors.

We ask, is your investment story profitable? We might also ask if the current investment story will continue to be profitable or will collapse like a house of cards bringing on another stock market crash, financial crisis, and financial ruin for many. While the Buffett investment story is for long term, buy and hold investors, there are perfectly profitable investment stories for the short term. But, they require that you are able to get in at the right time and get out while the getting is still good.

An example they bring up in the Motif article is the stimulus to the market by ultra-low interest rates in the years following the financial crisis.

For example, the market’s belief in the power of the Fed’s experiments with ultra-low interest rates and quantitative easing (QE) helped drive the S&P 500 much higher from 2010 to 2014, though those policies may ultimately prove disastrous in the long run, as market bears believe.

Right now, no one, including the Fed, knows the long-term impact of these actions.  But much to the chagrin of market bears, until a bear market disaster finally hits, financial markets can and do move significantly higher than one may expect based on pure fundamentals, such as earnings growth, cash flows, price-earnings ratios, credit spreads, and yield curves.

The same to a lesser degree can be said for the Trump tax stimulus which put a lot of money in the hands or corporate America, allowed for repeated stock buybacks, and may well have keep the market up in the last year. A problem with stories is believing in them after they are no longer true or believing in a story when something else is what is driving the market. This is when investors overstay their welcome and not only see their dreams of profits go up in smoke but watch their investment capital go the same way as well!

Is Your Investment Story True?

There is a lot of hype in the markets, especially when a company wants to float an IPO. There are also stories offered by companies that have fallen on hard times and are hoping that they can attract new investors and keep their stock price from falling too drastically. We have written that dividend stocks can be perilous when an investor just looks at the size of the dividend and does not do any fundamental analysis of the company involved. If a company’s stock falls precipitously and they do not change their dividend, investors may be attracted by a 12% or 15% dividend which will disappear in a flash the next quarter as the company “regroups.”

 

When you see Kraft Heinz as a rebound opportunity, is your investment story profitable or are you falling into a value trap?

Kraft Heinz Products

 

An investment story that turns out not to have been as true as we might have liked is Kraft Heinz. This was considered a “widow and orphan” stock, solid with a good dividend. But, these folks have not keep up with changing food tastes and preferences of the American consumer. As such, any attempt at creating a story about this stock in preparation for a recovery are met with skepticism and the suspicious that this stock is now a value trap. Nevertheless, there may be smart enough investors out there who will be able to anticipate when Kraft Heinz has fallen enough to be a good buy again. Then the story needs to be the recovery of a grand old company. Time will tell on this one.

What Will the Boeing Story Be?

We just asked in a recent article, Why Invest in Boeing? We were pretty positive about this company as a long term investment based on their technological expertise and dominance across several areas of aerospace endeavors. But, now there have been two crashes of the new 737 Max 8 jet and both China and Indonesia have ordered these jets to be grounded until the problem can be figured out. It is especially worrisome that some experts are saying that new automated technology designed to make these jets safer may have malfunctioned and caused both planes to crash shortly after takeoff.
Boeing fell 11% on the news and could fall more if these events lead to a general discomfort with Boeing technology. Investors in Boeing will need to decide what they investment story is with the aviation giant and be ready to change that story as events unfold!

 

When you look at Boeing as the perfect investment is your investment story profitable to leading you into long term losses?

Boeing 787 Dreamliner

 

Constantly Re-evaluating Your Investment Story

If your investment story is the same as Warren Buffett’s, you have two tasks to perform. One is to simply keep track of the growth of the American economy and the other is to find and analyze prospective investments. But, if your investment story is the story of the day such as the growth of emerging markets, the migration industrial production out of China and into other Asian economies, or a miraculous resolution of the Brexit mess, this will require constant attention and a good hand at market timing.

A good investment story that lets you sleep at night may be less profitable but a red hot investment story that makes great short term profits may be the stuff of headaches and ulcers.

When Are Cheap Investments the Best Investments?

A couple of years ago we wrote to beware of penny stocks. The point being that cheap investments are not necessarily good investments. After all, there is probably a good reason why a stock is selling for a low price. On the other hand, companies that are just starting out and are not being watched by Wall Street analysts may be very promising but no one is watching. The bottom line for stock value (as opposed to price) is intrinsic stock value. When you have unique insights about the stock in question and the big guys are not watching, you can often make very profitable investments in this area. In this regard we got to thinking, when are cheap investments the best investments?

The Largest Valuation Gap in 70 Years

CNBC writes about the current gap between cheap and expensive stocks. This is called the valuation gap and it is historically large. The last time there was such a difference between the high flyers and the lowest echelons of the stock market was when Harry Truman was President, the world was ravaged from World War II, and the Korean War was brewing.

For investors struggling to find opportunities after a stellar rebound in the aging bull market, value stocks might be the best bet.

Case in point: Cheaply priced stocks are getting cheaper as expensive stocks have gotten extremely pricey, pushing the valuation gap to the widest in 70 years, according to AB Bernstein. The record dispersion puts cheap equities in a sweet spot as other pockets of the market start losing the appeal because of their high prices.

What the analyst emphasizes is that the best time for buying value stocks is the point at which valuations have been spread out the most. Many analysts have commented that this must recent upsurge in the stock market is certainly not being driven by value and fundamentals as earnings are getting worse and growth projections in the USA and abroad are not very positive.

 

When are cheap investments the best investments? It is when the valuation gap looks like it does today.

Stock Market Valuation Gap

 

What CNBC says is from a technical perspective as they look at value stocks as a technical factor. It turns out that when valuations surge to extreme levels, the value stocks whose prices have been left behind tend to outperform in the coming six to twelve months.

Of course, for long term value investors, when fundamental analysis of a stock shows value and the price is low, this becomes a historic buying opportunity.

Unique Investments in Industry “Disruptors”

In this case, we take a look back a couple of years at Trade Desk which was selling for $29 a share after its IPO in September of 2016 and was trading at $49 as recently as May of 2018. Since then the stock has taken off and is pushing $200 a share today. When are cheap investments the best investments in cases like Trade Desk? It is when they change how things are done in an industry or even create entirely new sectors. When this happens it often takes insight more so than analysis of fundamentals to get in when the valuation is still cheap. But, companies like Microsoft and Apple were similar stories back in the day and have routinely offered buying opportunities along the way.

Doing Your Homework on Cheap Investments

Yahoo Finance looks at cheap stocks as well and suggests 7 cheap stocks with potential for price appreciation. They also offer a note of caution about just looking at the cheap part!

Stocks under $5 usually aren’t the best stocks. After all, almost every company prices their initial public offering at $10 per share or more. Thus, if a stock is trading under $5, that means the stock has most likely been subject to a 50%-plus sell-off, which is a sign that the company is having major trouble.

For this reason alone, stocks under $5 should be classified as high-risk stocks by investors.

But, some of them should also be classified as high-reward stocks. Again, stocks under $5 got there because investors sold them in bunches. That means investor sentiment surrounding these stocks is depressed, and expectations are low. If the company can top those low expectations and sentiment dramatically improves, these same really beaten up stocks can become huge overnight winners.

They mention both Snap and Pandora with both doubled in stock price recently. The seven that they offer as buying opportunities are these.

Blue Apron: makes meal kits
Pier 1: Struggling but possibly recovering retailer
Big 5 Sporting Goods: sells sporting goods
Groupon: coupon and savings platform whose demise is not imminent
Francesca’s: woman’s clothing retailer up for acquisition
Blink: charges electronic vehicles
Sirius XM: broadcasting

The arguments for buying these stocks range from “all of the damage has already been done” to “putting their house in order” to “just wait until the need for their services catches up” which is the case for Blink as more and more electronic vehicles are sold.

In each case, investors should be wary and should realize that these stocks are risky propositions. And, in every case, these are not stocks to buy hold and forget about unless you have an investing “death wish!”

Recognizing the Right Value Story

There are times when the stock of a company is falling like a rock and everyone is bailing out, only to discover that the investment makes a huge comeback. One case in point was Sears several years ago. Yes, Sears was the leading retailer, fell behind the times and lost pretty much everything. Even today it is in trouble. But, in the early days of its demise the stock made a huge comeback. This was because investors finally realized how much property Sears owned!

Unencumbered property is generally considered part of a company’s margin of safety. However, in the case of Sears, they were unable to change how they did business, stay ahead of the issue of online sales, and only delayed the inevitable by selling their real estate arm to General Growth in 1995.

Nevertheless, for anyone who looked past Sears as a cheap and dying stock, recognized them as a real estate investment, and then purchased shares, it was a great investment. However, that factor only lasted while it lasted, making Sears a very good investment for a very short time.

 

When Are Cheap Investments the Best Investments? It is when nobody recognizes their hidden value.

Sears Was Briefly a Great Investment

 

When Are Cheap Investments the Best Investments?

The moral to this story is that cheap investments are the best investments when the market is looking elsewhere, when there is overlooked value, and when market enthusiasm drives up valuations into the stratosphere while leaving value stocks behind. Such may be the case today.

Why Invest in Boeing?

Not long ago we wrote about whether or not Boeing would need to outsource production in order to remain profitable. That question largely had to do with the threat of a long-term trade war and Boeing potentially losing markets as a result. The trade war may well be on its way to at least a temporary resolution so the question is why invest in Boeing over the long term? Essentially Boeing is a cash cow with a dominant position in an increasingly higher and higher cost of entry business. Its only real competitor is Airbus as the two of them control more than 85% of the commercial aviation market.

Boeing

Boeing was founded by William Boeing in 1916 as Pacific Aero Products Co. He changed the name to The Boeing Company two years later. In 1997 Boeing merged with McDonnell Douglas in 1997. Boeing is the largest US exporter by dollar amount. The company ranks number five in the world as a defense contractor. Boeing manufactures and sells airplanes, rockets, satellites, and helicopters of its own design. It also leases products and provides lifetime product support to everything that it sells.

High Cost of Entry Business

Why invest in Boeing? Our first reason is that they are in a high cost of entry business. They deal in state of the art, high technology, and produce very expensive products, which they are able to routinely sell at handsome, profits for years and even decades. The amounts money needed to compete in this arena are huge, the skill sets needed take decades to develop, and the base technologies are closely held.

State of the Art Jets

The most recent major addition to Boeing’s fleet of jets is the 787 Dreamliner. This wide-body, long haul, mid-sized jet is roughly a fifth more fuel-efficient than its predecessors and competitors. Built with composite materials, the plane is lighter and cheaper to operate than other jets of comparable size and range.

Its noise-reducing features are state of the art as are it mostly electrical flight systems. The jet entered testing in 2009 and finished testing in 2011. Boeing spent roughly $32 Billion developing this jet.

 

The Dreamliner is one of the main reason why to invest in Boeing.

Boeing 787 Dreamliner

 

Not only did Boeing spend $32 Billion in development, but also it took just over 10 years from concept to a flying and sellable jet. Now the 787 is a mainstay in the commercial aviation market and Boeing is looking to develop the next start-of-the-art commercial jet. The only other company with comparable resources is Airbus.

Missiles and Satellites

Going back to the Minuteman missiles in silos across the wheat fields of North Dakota and grasslands of Montana to the current partnership with Lockheed Martin in the United Launch Alliance, Boeing has been in the rocket business. They still maintain missiles for the US nuclear deterrent and run the United Launch Alliance with Lockheed Martin. They maintained the Space Shuttles when that program was still running. This is again, a high cost of entry business that takes huge amounts of resources, state of the art technological skills, and the capacity to guard what are essentially state secrets forever.

 

Because Boeing is part of the United Launch Alliance is Why Invest in Boeing

United Launch Alliance Orion

 

Boeing does this work and does it at a profit as part of its Defense, Space, and Security division. This company is one of the mainstays of US military readiness and able to make a steady profit year in and year out.

Why Invest in Boeing?

As we so often come back to on these pages, long term successful investing depends on the analysis of intrinsic stock value and Boeing has this is spades! The company routinely makes money. This ability starts with the ability to turn new technology into marketable products. But, it is more with Boeing because they have such a wide range of skills and virtually control the commercial jet business along with Airbus. When they have to, they share little and inconsequential parts of their knowledge base to do offshore fabrication to maintain customer bases. Then they do all design, critical manufacturing, and assembly in the USA.

Adding Boeing to Your Portfolio

The Motley Fool writes about 3 Stocks to Build Your Portfolio Around. The first on their list is Boeing.

If you’re looking for one stock to build your portfolio around, one great company you can count on to hold its value over time while paying you a steady dividend, I can’t think of a better place to start than Boeing.

In business for more than a century, Boeing clearly has staying power. This company isn’t going to disappear until someone invents a better way to move quickly over long distances across large bodies of land and water. And while Boeing doesn’t have a monopoly on building planes, it arguably has the next best thing: an oligopoly between it and its rival Airbus, which between them account for roughly 88% of all commercial aircraft revenue.

With $13.6 billion in annual free cash flow to back up its $10.5 billion in reported earnings, you know that Boeing’s earnings are of exceedingly high quality, and more than sufficient to cover the dividend. Boeing’s payout ratio, in fact, is a very low 38%, meaning that only 38% of earnings suffice to pay the entire dividend.

Boeing has been paying dividends for decades and has been steadily increasing their dividend for the last seven years.

Boeing is a major player in commercial aviation and in the defense industry. This allows it to use technologies and skill sets developed in one arena and apply them to another. They are also important to the US economy as the exporter who rivals all of US agriculture in how much money they bring back to the USA. Although Boeing has substantial cash reserves, they do not have a large hoard of cash offshore.

There are certainly companies that have grown faster, but as the folks at The Motley Fool note, until someone invents a new technology for moving people and cargo quickly from one continent to another, Boeing will have customers. And, as higher technical skills make that job more efficient and profitable, Boeing will remain at the head of the line.

another, Boeing will have customers. And, as higher technical skills make that job more efficient and profitable, Boeing will remain at the head of the line.

How Can You Invest in Artificial Intelligence?

Back in the day when Jobs and Wozniak invented the Apple computer they simply used existing technology to provide folks with their own personal computer. As computer technology has advanced over the last forty years it has been incorporated into PCs, laptops, tablets, and smart phones. Investors who profited were the ones who put their money in companies that made the best use of better and better technology. Today the “new wave” of technology is artificial intelligence. How can you invest in artificial intelligence? There are not very many companies that are pure AI investments. But, many of the tech giants and others are using AI for advanced products and services. The key to profits in this arena will be in the use to which AI is put and the profit potential of that application.

Artificial Intelligence

Computers can process information much faster than humans but can they think? The concept of artificial intelligence goes back to the 1950s and Alan Turing (inventor of the computer system that cracked the German Enigma Code). Turing wondered if we would ever create machine that could “reason at the level of a human being.” The “Turing test” is that “computers need to complete reasoning puzzles as well as humans in order to be considered thinking in an autonomous manner.”

A more current view is that in order to have artificial intelligence at computer system must display intentionality, intelligence, and adaptability.

Intentionality

A key feature of the algorithms that make up artificial intelligence is that they allow computers to make decisions. They do this by having access to vast amount of digital information, having remote sensors, and having incredibly fast processing power. Thus such a computer system can process huge amounts of information almost instantaneously to make real world decisions. The use of artificial intelligence in self-driving cars is a prime example.

Self-Learning (Intelligence)

Artificial intelligence systems learn from their mistakes and can correct their programming to avoid making the same errors again. Such systems can keep learning and improving their performance. They can spot relevant information within huge amounts of data and make predictions that even intelligent humans would find hard to make. Such systems require intelligent programming as well because the system needs useful input to make useful predictions.

Adaptability

A key feature of artificial intelligence is that the smart, decision-making, and self-learning system can adapt. They learn from their own experience and this takes them beyond what the programmer or database might have predicted.

(Brookings Institute, What Is Artificial Intelligence?)

 

Alan Turing was the first to envision artificial intelligence. How can you invest in artificial intelligence today?

Alan Turing

 

Self-Driving Vehicles

The reason why artificial intelligence can be applied to self-driving vehicles to day is because of the speed of data processing, size of databases, improved remote sensors, and programming that ties all of this together. The programming sets the parameters for the autonomous vehicle and then it learns “on the road.”

The Data Driven Investor writes about artificial intelligence and autonomous vehicles.

The automotive AI market reported that it is expected to be valued at $783 million in 2017 and expected to reach close to $11k million by 2025, at a CAGR of about 38.5%. IHS Markit predicted that the installation rate of AI-based systems of new vehicles would rise by 109% in 2025, compared to the adoption rate of 8% in 2015. AI-based systems will become a standard in new vehicles especially in these two categories:

  • Infotainment human-machine interface, including speech recognition and gesture recognition, eye tracking and driver monitoring, virtual assistance and natural language interfaces.
  • Advanced Driver Assistance Systems (ADAS) and autonomous vehicles, including camera-based machine vision systems, radar-based detection units, driver condition evaluation and sensor fusion engine control units (ECUs).

Deep learning technology, which is a technique for implementing machine learning (an approach to achieve AI), is expected to be the largest and the fastest-growing technology in the automotive AI market. It is currently being used in voice recognition, voice search, recommendation engines, sentiment analysis, image recognition and motion detection in autonomous vehicles.

So, how can you invest in artificial intelligence? We recently asked if it is time to buy GM based on their moving into electric and autonomous vehicles. We noted in that article that the self-driving car market could be worth as much as $7 Trillion by the middle of the century!

The Many Applications of Artificial Intelligence

Investor’s Business Daily writes about artificial intelligence stocks and notes, as we did, that although there are few companies that are strictly AI investments there are lots of companies applying the technology to their products and services.

It’s no secret that Alphabet (GOOGL), Microsoft (MSFT), Facebook (FB) and Amazon.com (AMZN) are all spending big bucks on AI technology. The tech giants are putting AI in consumer products and services, such as voice-activated smart home devices. Amazon, Google and Microsoft also are pushing AI technology into cloud computing.

Other companies highlighted in the article are IBM, Accenture, Epam Systems, Adobe Systems, Salesforce.com, Trade Desk, MTCH, IAC, Five9, Nvidia, Fortinet, Palo Alto Networks, VISA, and MasterCard.

The point is that artificial intelligence will have many possible applications. And, it will be how effectively a company applies the technology that will make the difference for the investor.

Selling Picks and Shovels Instead of Digging for Gold

A famous observation from the days of the 19th century California Gold Rush was that you were more likely to prosper selling picks and shovels to eager miners than by digging for gold yourself.

This thought may apply to the field of artificial intelligence as well. Applications of this advanced technology require lots and lots of advanced chips. The leader in this area so far is Nvidia but companies like Tesla are now starting to design and manufacture their own chips.

Forbes reported on why Tesla dropped Nvidia’s AI platform last year and replaced it with its own.

According to Musk, the Nvidia Drive PX2 computing platform – with one Pascal GPU and 2 Parker processors or CPUs – currently used in Tesla’s custom autonomous computerAutopilot Hardware 2.5 can process 200 frames a second, compared to “over 2,000 frames a second” with full redundancy and fail-over with Tesla’s designed computer.

Nvidia supplies chips for the likes of Mercedes and Honda. To the extent that a maker of self-driving cars wants to buy their chips instead of building that technology from the ground up, they will use someone like Nvidia, a leader in the field.

 

How can you invest in artificial intelligence? The Waymo Self-driving car uses AI!

Waymo Self-driving Car


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