DJI’s Manifold on top of the Matrice 100. Source: DJI.

DJI’s announcement has likely taken Qualcomm(NASDAQ:QCOM) and Intel(NASDAQ:INTC) — which both have their own drone making plans — by surprise. But for Nvidia, which was marginalized in the mobile chip market by Qualcomm, the Manifold represents a strong vote of confidence in its future in drones.

Can Nvidia challenge Qualcomm and Intel?
Qualcomm and Intel recently unveiled new designs for creating cheaper drones. Qualcomm introduced Snapdragon Flight, a reference design which pairs depth-sensing cameras with its Snapdragon chips. It claims that these designs will reduce the price of the average 4K camera drone from $1,200 to $300, and extend its battery life from 20 minutes to an hour. Intel is pairing its RealSense depth-sensing cameras with its Atom processors with similar goals in mind.

Current-gen consumer drones are mostly simpler devices that are manually controlled and powered by an image processing system-on-chip, usually made by Ambarella(NASDAQ:AMBA). Nvidia’s design won’t compete directly against Ambarella, which dominates the market for low- to mid-range drones. Instead, it seems aimed at a niche market of developers who are willing to pay several thousand dollars for a top-tier drone with an onboard computer. Therefore, Nvidia also won’t be competing directly against Intel’s and Qualcomm’s all-in-one solutions for cheaper drones.

Diversifying into the drone market
Intel, Qualcomm, and Nvidia are all expanding into drones to diversify away from their respective core markets of PC chips, mobile chips, and GPUs. That’s because most analysts expect demand for drones to surge over the next few years. According to BI Intelligence, the market for commercial and civilian drones could grow at a compound annual growth rate of 19% between 2015 and 2020, compared to just 5% growth for military drones.

Intel is trying to offset weak PC sales and hefty mobile subsidies by expanding its processors into new markets like drones, wearables, and connected devices. Qualcomm is adopting a similar strategy to escape the commoditization of the mobile chip market by cheaper Chinese competitors. For Nvidia, diversification into drones isn’t as urgent, since sales at its core GPU business rose 7% annually and accounted for 82% of its revenue in the first half of fiscal 2016.

During that period, Tegra sales fell 8% and accounted for 12% of Nvidia’s revenue. After failing to establish a firm foothold in smartphones, Nvidia promoted the Tegra as a potent chip for gaming tablets, 2-in-1 devices, and set-top boxes. To showcase that processing power, It launched its own Shield handheld, gaming tablet, and set-top box.

Nvidia’s Shield devices. Source: Nvidia.

As for drones, DJI’s Manifold probably won’t reach mainstream consumers, but it indicates that the Tegra could have a bright future in next-gen drones. DJI claims that the Tegra’s “4-plus-1” architecture lets the Manifold use up to four cores for “heavy computing,” while only using a single battery-saver core for “simple calculations.” Looking beyond drones, Nvidia believes that Tegra chips can also power VR headsets, car infotainment screens, and crash-avoidance image sensors for autonomous and semi-autonomous cars in the near future.

Fighting battles on multiple fronts
Nvidia hasn’t introduced a dedicated drone design to challenge Intel, Qualcomm, or Ambarella yet. But if it establishes a closer relationship with DJI and Parrot, that could certainly happen and give Nvidia a new way to challenge those rival chipmakers.

Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ambarella and Qualcomm. The Motley Fool recommends Intel and Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.