Buy these stocks to get a piece of the driverless auto industry.
Autonomous vehicles, or AVs, are pretty self explanatory: vehicles that move without human control. The technology is extremely complex and is far from wide-scale adoption and rollout. Limited tests run in San Francisco with autonomous ride-hailing vehicles have already run into snags where cars lose touch with centralized servers, remaining frozen in streets. The technology relies on massive amounts of artificial intelligence and machine learning to smoothly operate. That said, the industry has the potential to revolutionize how people move by opening up parking spaces, streamlining personal transportation and potentially changing car ownership from personal to communal. These changes are alluring to consumers, and thus important to traditional automakers as well. Here’s a list of the seven best autonomous vehicle stocks to buy now.
One of the first companies to buy into AV technology, Alphabet has been working on autonomous driving since 2009. Now the company owns Waymo, an electric vehicle, or EV, company that currently operates in Phoenix and San Francisco. While far from being commercially viable, the subsidiary continues to attract major investment interest, raising $2.5 billion last year during a round of funding. The same round of funding valued Waymo at roughly $30 billion, a stone’s throw away from the market cap of Ford Motor Co. (F), which is worth around $45 billion at the time of writing. Now is the time to invest in tech behemoths like Alphabet since market downturns have put the company into value territory.
Nvidia Corp. (NVDA)
Nvidia is a high-quality chip and software company that makes the technology many automakers use to deploy autonomous technology. It is developing chips to be used for personal vehicles already on the market, and for complete AV commercialization. Nvidia is currently partnered with Mercedes-Benz to provide technology for its current vehicle supply, and the platform that Amazon.com Inc. (AMZN) subsidiary Zoox utilizes for its fully autonomous taxi service. Nvidia has a strong customer base of automotive partners, including Range Rover, Jaguar and Xpeng, and reported $566 million in revenue for fiscal year 2022 from its automotive department. That division should only continue to grow alongside the AV industry.
Tesla Inc. (TSLA)
Tesla is at the forefront of autonomous vehicle technology. The company has long touted its hardware that comes standard with all Tesla vehicles, which is capable of providing so-called autopilot technology but is dependent on purchasing software upgrades for the vehicle. Tesla is on the road to becoming a major producer in the automotive industry, and is easily the most valuable carmaker in the world due to its massive potential. The company continues to report strong vehicle sales growth and production numbers: In the second quarter of 2022, Tesla delivered 254,695 vehicles, a 26% increase from the same quarter the year before. Tesla is also confident that its current new cars will be capable of full self-driving capability, pending regulatory approval. However, the company has recently hit snags with the technology as its self-driving software has come under fire from regulators amid alleged safety concerns.
Ford Motor Co. (F)
Ford took a major stake in the AV industry when it invested $1 billion into Argo AI, an autonomous vehicle startup, in 2017. Ford is working to build a commercial self-driving ride-hailing service with the startup in Miami, Washington, D.C., and Austin, Texas. The company has also partnered with Walmart Inc. (WMT) to provide automated vehicles to the retail giant, enabling more effective last-mile delivery of grocery goods across the country. Ford’s self-driving technology is already being utilized with many of its current production vehicles, thanks to its BlueCruise technology. The company expects the technology to be extremely lucrative, with connected advanced-driver-assistance systems projected to bring in $20 billion in revenue annually by 2030.
Volkswagen AG (VWAGY)
Volkswagen has long sought to be a leader in new automotive technology, from developing new electric vehicles to now building autonomous technology. In fact, in 2020, Volkswagen vowed to invest $86 billion in electric and autonomous technology over the coming five years. Volkswagen has developed its own software to be used in its autonomous vehicles, which is called Cariad. And the company has partnered with Argo AI to further improve its proprietary software. Volkswagen estimates that it will soon realize $20 billion in revenue from the software-sharing initiative. The company reported last quarter that deliveries were down significantly to 1.92 million from 2.2 million a year ago. However, that shortfall was largely due to supply chain issues, and the company remains a global leader in automotive technologies. The current forward price-earnings ratio is 5.5, making Volkswagen look like an interesting value stock at current levels.
Baidu Inc. (BIDU)
Baidu is a Chinese multinational technology company that has been working to develop fully autonomous vehicles since 2014. The search giant has been seeking to develop AV software to help diversify its revenue stream. It recently announced its intent to produce Level 4 autonomous cars — meaning vehicles can drive themselves with almost no human assistance — through its auto subsidiary Jidu Automotive. If true, the announcement means Baidu will bring the most advanced car technology to the Chinese mainland by 2023. Additionally, Baidu is seeking to grow an AV robotaxi service, with a goal to have fully automated services available in 100 cities by 2030. The company is already raking in some money from its AV technology: Baidu expects non-advertising revenue, driven by AV efforts and cloud computing, to exceed advertising revenue by 2024 or so.
General Motors Co. (GM)
GM is arguably the furthest ahead in terms of AV capability. It aims to have a vehicle fully designed to be autonomous in production and use by 2023. And it was the first automaker to receive approval for fully autonomous testing of vehicles in San Francisco. People in the city can request and receive rides from the fully autonomous Cruise vehicles on the road. The integration of the technology will continue to become ingrained in other commercial and personal vehicles, through technology like adaptive cruise control, as GM sees its EV and AV technologies evolving together. The company’s goal is to get its Cruise autonomous vehicle division to $50 billion in revenue by 2027. This additional revenue should also accompany high profit margins, dramatically increasing the value of the company if that pans out.
Top 7 autonomous vehicle stocks to buy now:
— Alphabet Inc. (GOOG, GOOGL)
— Nvidia Corp. (NVDA)
— Tesla Inc. (TSLA)
— Ford Motor Co. (F)
— Volkswagen AG (VWAGY)
— Baidu Inc. (BIDU)
— General Motors Co. (GM)
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Update 07/15/22: This story was previously published at an earlier date and has been updated with new information.