NIO stock alert: Nio announces success with self-driving chip

Chinese manufacturer of electric vehicles Nio (NYSE:NIO) had to reckon with falling share prices despite positive developments. At the end of last week, the company announced at its Tech Day what it was spending its research and development funds on. In particular, an advanced computer chip that was specially developed for autonomous driving made headlines. Nevertheless, investors were skeptical about NIO shares on Monday.

According to TechNode The electric car maker reportedly announced the world’s first five-nanometer chip for automated driving. The system-on-chip (SoC) architecture, called Shenji NX9031, offers “high pixel throughputs of 6.25 gigapixels per second, which NIO says enables it to capture higher resolution images in poorly lit environments compared to flagship offerings from leading chip makers.”

Nio CEO William Li also said the company had completed a tape-out for its automated driving semiconductor. CnEVPostTape-out “is a technical term from the chip industry that describes the process of converting a circuit design into a chip that can be produced on an assembly line after the chip design is completed.”

Significant, CnEVPost notes that after a successful tape-out, “mass production of a chip prototype can begin if it passes subsequent tests.”

NIO stock offers a compelling fundamental narrative

While the Chinese EV specialist is pushing ahead with its autonomous chip, TechNode Nio also said the launch of its advanced driver assistance system Navigate on Pilot Plus (NOP+) 2.0 is on schedule, with the debut set to take place sometime in the second half of this year.

One of Nio’s goals is to use artificial intelligence to equip vehicles with point-to-point navigation on Chinese highways, city streets and parking lots. Currently, the EV giant Tesla (NASDAQ:TSL) is leading this race.

Another element that is likely to drive up NIO’s share price in the long term is the introduction of the company’s own operating system, Sky OS. TechNodeThe system will have “central control of all vehicle domains, enabling enhanced user experiences.” A key benefit of this advanced operating system is the ability to quickly and conveniently arrange Nio’s battery replacement service.

Still, NIO stock has lost about 4% of its value over the past five sessions. Over the past month, the decline has been about 1%. While the underlying sector is promising, overcrowding is a major headwind. Since there are more than 200 electric vehicle manufacturers in China, it may be inevitable that many will fail. In the meantime, the existence of so many companies could cannibalize the sales of the most promising ones.

At the time of publication, Josh Enomoto had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.