Baidu (BIDU) and Autonomous Cars: The Big Picture

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Just a few days ago, Beijing-based internet search giant — the so-called “Google of China” — Baidu Inc (ADR) (NASDAQ:BIDU) announced it had established $1.5 billion worth of funding for the purpose of investing in self-driving automobile startups.

Baidu, BIDU Stock is a Proactive Investment in Autonomous CarsIt’s certainly a market worth investing in. Though the technology has come a long way in the field of autonomous cars, there’s still much more needed to be done. Still, most BIDU stockholders aren’t entirely sure what the end goal is here and exactly what Baidu has in mind. Baidu is already developing its own self-driving vehicle technologies, and what it can’t build on its own, it’s already acquired.

The easiest explanation of this earmarked money to owners of Baidu stock is that it’s time to start thinking “bigger picture” about autonomic cars.

Time for Phase Two of Autonomous Car Tech

There are many organizations working on autonomous vehicle technologies. Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) has been developing such cars for a while now as part of a project called Waymo. Apple Inc. (NASDAQ:AAPL) (though it’s recently pared back its efforts) continues to build some of the underlying technologies that could be used in autonomous vehicles. And of course, Tesla Inc (NASDAQ:TSLA) has put self-driving technologies in most of its cars, a feature it dubs Enhanced Autopilot. Baidu is counted in this group of companies that have already done a great deal of self-driving technology development.

While you’ve heard of several of the big-name outfits developing home-grown self-driving solutions, there are dozens more organizations you’ve never heard of that are going to play an important role if self-driving vehicles are to become the new norm.

Here’s some food for thought for current and would-be owners of BIDU stock. The bulk of the autonomous vehicle focus thus far has been — and continues to be — teaching cars how to remain between the lines on the road, stop before rear-ending another vehicle, and figure out when it’s safe to turn. The fact of the matter is there are many more technological elements that need to be considered if autonomous vehicles are to become widely commercialized.

One key consideration that’s yet to get enough attention is that any “connected” car is subject to hacking.

That’s where a company like Argus Cybersecurity comes into the picture. It develops software to protect a vehicle from cyber tampering that could not only prove a nuisance, but deadly as well. Unlike a virus in a computer or laptop, fixing a digital virus or worm that’s infected a car after the fact may be too late.

Then there’s Aeva, which is developing next-generation lidar technology. To the average layperson who doesn’t know how self-driving cars figure out where potential hazards are in relation to the vehicle, the simplified version is that the underlying technology uses a combination of sensors. One such sensor is old-fashioned radar, which is similar to the radar developed back in the ’40s in response to the need for such a tool during World War II. Another type of sensor is called lidar, which can determine the speed at which other vehicles are moving.

Both technologies are necessary, but because each type of sensor is distinct, combining the data from both kinds of sensors is potentially problematic. Aeva’s workaround is the development of one sensor that can perform both tasks, creating something of a holy grail for the autonomous car world that can wipe away the last of the lingering safety and expense problems of employing two kinds of sensors. Interestingly, Aeva was started by former Apple engineers, Soroush Salehian and Mina Rezk.

Aeva isn’t the only autonomous car technology company that was started by defectors from rival self-driving vehicle developers. Drive.ai now names Andrew Ng as a board member. Ng was formerly the chief of the Google Brain (A.I.) project, as well as the former chief scientist with Baidu. Now he’s helping startup Drive.ai build a superior self-driving automobile technology.

On the surface, what Drive.ai is doing doesn’t seem too different from what other companies are doing. It’s teaching cars to recognize and respond to traffic lights. The difference is how it’s doing it. Whereas most developers are manually programming what a street light “looks” like to the brain of the autonomous car, Drive.ai is showing the core computer what all sorts of different traffic lights look like so its system can learn for itself. Ng believes this approach will allow for faster deployment of vehicles.

And those are just some of the things that still need to be fully developed before self-driving cars are truly ready for widespread use. Most everything done up until this point is more like a test prototype.

Bottom Line for BIDU Stock

The purpose of Baidu’s $1.5 billion fund is largely to (1) ensure that all the necessary technologies exist when the self-driving automobile industry is ready for prime time, and (2) that Baidu has access to those technologies, via ownership of the outfits developing them. In that light, setting aside $1.5 billion isn’t merely speculation; it’s a must-do.

While this funding may not add much value to BIDU stock in the short term, it’s just another reason to see Baidu as one of China’s top technology plays, even if this initiative will take years to bear fruit.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/baidu-bidu-autonomous-cars/.

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