Tuesday's market action was looking like a nice potential consolidation day after Monday's terrific come-back rally.
Many technology stocks were acting well, including Apple (AAPL - Free Report) which was pushing $175 and NVIDIA (NVDA - Free Report) which was knocking on $250 again as the company's founder Jensen Huang wowed investors and analysts at another awe-inspiring GPU Tech Conference in San Jose this week.
And then it happened.
As soon as I saw the news flash from Reuters just before noon, I knew it wasn't good...
* NVIDIA SAYS TEMPORARILY SUSPENDING TESTING OF SELF-DRIVING CARS ON PUBLIC ROADS TO "LEARN FROM THE UBER INCIDENTÂ¿Â¿Â¿"
* NVIDIA SAYS GLOBAL FLEET OF MANUALLY DRIVEN DATA COLLECTION VEHICLES CONTINUE TO OPERATE
Shares dropped quickly from $245 to $235 in 30 mins.
And all I could think was "Bad move NVIDIA. I guess we'll get to buy some shares cheaper."
Here was my Twitter post just after 12:30 pm ET...
As it turns out, I was a little premature in judging one of my favorite technology companies so harshly.
More coming up on why this was more of "strategic" technology move by NVIDIA and not a "reactionary" one driven by headlines.
And what I didn't know yet was the news going on with Tesla (TSLA - Free Report) and a reported driver death near Mountain View, CA last Friday -- which the market was mostly alerted to when the U.S. National Transportation Safety Board (NTSB) said on Tuesday morning that they were investigating.
Intel Says "1-second" But What Say You?
That Mashable article I was re-tweeting was about Intel (INTC - Free Report) doing their own analysis of the Uber incident video and concluding that their technology would have spotted the pedestrian 1-second before impact.
In other words, same outcome: impact unavoidable.
Those opposed to autonomous vehicles are obviously up in arms.
Yes, the driver was distracted as we can see from the interior dash cam. Oh, and a convicted felon. Nice job Uber letting just anyone test ground-breaking "weaponized" technology.
But if you watch the video, you have to ask yourself...
"How many drivers would have seen that pedestrian coming out of the dark, in the middle of the road, in time to stop -- distracted or not?"
The posted speed limit on that stretch of road was 40 MPH and the lighting wasn't great.
Would you let anyone in your family ever cross the road there, even in daylight?
My guess is that person would have been hit by over half of average drivers. If you haven't seen the video clip released by the Tempe, Arizona police, here it is...
***Viewer Discretion Advised***
Video from Uber Accident Released by Tempe Police
I'm not saying that autonomous driving doesn't have a long way to go before it becomes impressively safe and trusted. But it can definitely be improved upon to beat a 50% human error rate in similar situations.
So what I am really saying is that overall it will prove to be 10 times safer than the average driver who is...
*Distracted by their phone
*Full of bad and dangerous habits (not shoulder checking lane changes, speeding in residential areas, risky left turns, etc)
*Lacking understanding of visual perception dynamics like blind spots (eyes play tricks and a second look never hurts)
*Emotional (which rarely helps in driving)
This is to say nothing of people we know who shouldn't be on the roads at all...
I have been a proponent of autonomous vehicles ever since I became an investor in Mobileye (which Intel bought) over 3 years ago.
And I knew it might be a decade or more before the streets were filled with driverless cars.
But one thing I knew for sure that governments could do right away was adopt automatic emergency braking (AEB) as a standard feature on cars because it could greatly reduce the #1 most common accident that hurts so many people, especially in the age of distracted driving: the rear-end collision.
What do you think has happened to the rate of rear-end collisions since the invention of the smart phone?
From the Mashable article...
"Distracted driving is one of the leading causes of automotive accidents in the United States. According the National Highway Traffic Safety Commission, in 2015, the last year for which full details are available, distracted driving accidents resulted in 391,000 people injured, and 3,477 deaths on American roadways."
And here's what the National Highway Transportation Safety Administration posted on Twitter on March 26 via @NHTSAgov...
"On average, a pedestrian is killed every two hours and injured every seven minutes in traffic crashes."
Regulators and the public have to be very careful here about not tossing this baby (driverless cars) out with the bath water (a one-in-a-million-miles event). Here's my effort to help...
The Volatility of the Most Dangerous American Pastime
To have a sane discussion that can move us forward to safer roads, we have to come to grips with certain facts.
Fact #1: Driving is the most dangerous activity that the majority of the population takes part in every day.
Fact #2: Most Americans are unsafe drivers, but they actually believe otherwise due to scientifically proven ways we deceive ourselves. I was trained as a light aircraft pilot at the age of 15 and I rarely see any drivers with the same attention to details, procedure, and safety that pilots have.
Fact #3: Most Americans are poorly educated in probability and statistics.
Fact #4: Most Americans will see the Uber accident as "proof" that driverless cars are a bad or stupid idea.
Fact #5: Because of Facts #3 and #4, most Americans will not understand why this "tail event" is so small in comparison to the death and destruction caused by unsafe and/or distracted drivers every day.
Until the government goes full-Big Brother and installs mobile phone "turn-off" or monitoring devices in cars to stop people from looking at their addictive screens, I will do everything I can to support the advancement of autonomous vehicles.
A Constellation of Ideas and Innovation
Since I jumped the gun in convicting NVIDIA for backing down on real-world testing (with responsible and attentive drivers, not convicted felons), I owe the company a more fair treatment of their announcement and plans.
Wallace Witkowski and Jeremy C. Owens of MarketWatch have provided some great coverage of NVIDIA in the past 24 hours from the company's big investor-analyst GTC show going on in San Jose and I want to share some quotes from 3 articles that can all be found via this link...
Nvidia details next steps in AI, including self-driving simulator
Nvidia said Tuesday it does not expect its new autonomous-driving car simulator to fully replace real-world testing of self-driving cars but to significantly cut down on the amount of real-world testing needed. At the chipmaker's GPU Technology Conference, Nvidia elaborated on its decision to suspend real-world testing of self-driving cars following the first pedestrian fatality involving an Uber Technologies Inc car in Arizona and introduced its Constellation driving simulator.
But the Constellation is not meant to phase out real-world testing of self-driving cars, said Danny Shapiro, Nvidia's senior director of automotive products. "I think this will enable the acceleration of moving through that process to get to the point where we'll be able to continue to augment with actual testing but to be able to have additional software developed in a faster amount of time," Shapiro said. "So, we're not saying that it will necessarily totally replace it but a lot more simulated miles."
CEO Jensen Huang explained it this way...
“The reason we suspended was actually very simple — obviously there’s a new data point as a result of the accident last week. As engineers, we should wait to see if we learn something from that experience.”
So I think that the company is actually acting smart here by getting ahead of the news flow and regulators and doing what they do best -- R&D to make the smartest technology the world has ever seen.
And just so we're clear, NVDA's current revenue streams won't be impacted by this action in any noticeable way. Automotive is the smallest segment and will continue to grow at 50%+ per year.
All-In on Deep Learning
To learn more about NVIDIA's latest show-stoppers at the GPU Tech Conference, advancing AI from Hollywood to hospitals, check out this must-bookmark page which has bleeding edge AI innovations every other day: NVIDIA Newsroom.
And if you want to capture the energy and excitement of the most-inspiring CEO in the world, see this live-blog page of Jensen Huang's Keynote.
Here were just a few of the highlights...
*Medical imaging revolutionized with deep learning and cinematic rendering.
*Cambrian Explosion of networks is 500x in five years. Moore’s law would only have suggested 10X.
*World’s largest GPU – the equivalent of a 512 gigabyte memory. 1,440 movies could be transferred over this switch in one second. At $399,000 it's a bargain for corporations, universities and other scientific institutions doing research with massive amounts of data.
And if there was any doubt...
“We are all in on AI,” Jensen said. "The computation is growing exponentially. Deep learning models are growing in effectiveness at a double exponential – more data, more computing – are creating a double exponential for AI."
The Chinese Won't Let This Stop Their Plans for Driverless Cities
Huang also asked-and-answered questions like "Why don’t we just put a car and demo it?"
"Well, we’re trying to create an autonomous vehicle driving flow and infrastructure so the entire industry can take advantage of this and create the future of autonomous vehicles. But every car should have the benefits of AI to monitor us, make sure our gaze is active and not sleepy.
“Safety is the single most important thing. It’s the hardest computing problem. With the fatal accident, we’re reminded that this work is vitally important. We need to solve this problem step by step by step because so much is at stake. We have the opportunity so save so many lives if we do it right.
"This is the ultimate deep learning, AI problem. We have to manage faults even when we detect them. The bar for functional safety is really, really high. We’ve dedicated our last five to seven years to understanding this system. We are trying to understand this from end to end. There are four pillars: collecting data, training models, simulation, driving."
The R&D must and will press forward as the world absorbs another 1 billion vehicles in the next 12 years. One reason I always liked Baidu (BIDU - Free Report) as a leader in China's autonomous driving push -- besides the fact they are strategic technology partners with NVIDIA -- is that the city of Shanghai created a technology park where they could test driverless cars as safely as possible and as experimentally as they wished.
Clearly, we need some ideas like that here. Although, I bet that's exactly what Google has been doing on their top secret R&D campuses.
And to wit, here was the Waymo announcement Tuesday from Google parent Alphabet (GOOGL - Free Report) , minutes after the NVDA bombshell...
Google's Waymo Just Unveiled An Electric, Completely Self-Driving Jaguar
I think the trend is clear among tech experts, scientists, and regulators like the National Highway Traffic Safety Administration (NHTSA):
Driverless cars are a thing of the future that is closer than most drivers think.
Thank companies like NVIDIA, Google, Mobileye, Baidu, Tesla and Intel for that. I'd throw in Apple too because even if they gave up on actually producing a car, they will be highly involved with the technology necessary.
And thank the regulators in China and in Europe too, where NVIDIA has partnered with PACCAR and Bosch to deliver autonomous trucks. Our smart folks at the U.S. NHTSA are not far behind as they've have been a vocal supporter of Mobileye R&D from the start. I hope and expect that to continue.
May the robots win this war!
Disclosure: I own shares of NVDA and AAPL for the TAZR Trader portfolio.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader and Healthcare Innovators services. Click Follow Author above to receive his latest stock research and macro analysis.