The autonomous driving revolution isn’t sitting by idly, it’s revving its engine (or charging its battery!) as it gears up for a serious advance. To the outside world, it may just make for interesting headlines and some fun reading material. But for the readers at InvestorPlace, it makes us wonder about the top autonomous driving stocks to buy.
The interesting thing about the self-driving car revolution is that both traditional automakers as well as well-known technology companies are getting in on the mix. To keep track of those thoughts, I’ve recently launched a blog called Future of Auto as a reference point.
Because of my unique positioning in this growing field, I’ve had the pleasure of attending industry conferences and interviewing key figures in autonomous driving. Those conversations led to an important factor to consider: The autonomous driving movement is way more than just watching Netflix (NASDAQ:NFLX) or taking a nap on the way home from work. It impacts the entire multi-trillion dollar transportation network, ranging from ride-hailing services like Uber to semi trucks and personal vehicles.
With that in mind, let’s look at seven autonomous driving stocks to buy.
Many investors mention Nvidia (NASDAQ:NVDA) when talking about autonomous driving stocks to buy, but how many actually know what the company does?
Because honestly, most of Nvidia’s revenue is generated from other segments, like datacenter, gaming and professional graphics, among other groups. However, the autonomous driving movement has lured in one of the most innovative tech companies, and it’s now leading the charge.
Thanks to its Drive platform, which includes products like Constellation, Pegasus, IX and PX, autonomous driving has gone from a concept to a reality. Constellation is not shipping just yet, but it will allow for users to exponentially scale their autonomous driving systems, as the platform allows for testing in synthetic environments. The self-driving car system thinks it’s in the real world, when really, the user can tweak, build and most importantly test its scenario over and over again.
Synthetic testing is what allows a user to log billions of test miles vs millions of real-world miles without sacrificing the outcome.
Drive Pegasus is the actual onboard system that makes a vehicle capable of autonomous driving. Daimler (OTCMKTS:DDAIF) and Bosch recently selected Pegasus, which began shipping to customers last quarter, to power its mobility-as-a-service (MaaS) platform set to launch in the early part of next decade.
Finally, artificial intelligence is also taking over in the cabin of the car. That’s recently highlighted by Mercedes-Benz’s new MBUX system, but we’re also seeing it with Audi, BMW and others. Nvidia (which powers many of the systems for Audi and is behind the MBUX system for Mercedes) brings an intelligent punch inside the car as well.
There’s a reason that Nvidia’s automotive revenues hit a new record last quarter of $166 million. I wouldn’t expect it to dethrone gaming any time soon for Nvidia, but this company is a sure-fire way to play the coming revolution.
Another considered leader in autonomous driving in Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). In fact, Google’s autonomous driving project began more than nine years ago and was arguably the first major player in the business. As a result, its unit — now known as Waymo — is considered atop the MaaS movement.
Expanding its operation in Phoenix, AZ., Waymo is looking at a commercial launch in the next few months. Whether it gets there is another story, but the point is the same: No one else is this close to launching a service.
Waymo has already ordered more than 60,000 vehicles from Fiat Chrysler (NYSE:FCAU) and Jaguar to retrofit with its self-driving hardware. I spoke with Chris Heiser, the CEO of Renovo, who told me that this would likely be ready for a rollout of 10 to 20 cities in the next few years.
“That sounds about right to me,” he said, calling it a “reasonable rollout.”
But the company is looking further than just the U.S. In a recent podcast, CEO John Krafcik acknowledged that Waymo is testing semi trucks and is eyeing a move to Europe as well.
Waymo doesn’t plan to be late to the race; it plans to lead the autonomous driving charge.
General Motors (GM)
GM acquired Cruise Automation for a reported $1 billion just over two years ago. A $2.25 billion investment in Cruise by SoftBank for a near-20% stake left Cruise valued at more than $11 billion earlier this summer. A $750 million investment from Honda (NYSE:HMC) earlier this month valued Cruise at a whopping $14.6 billion.
Think GM CEO Mary Barra knows how to make a deal or what?
GM’s Cruise unit is considered a close second to Waymo, with plans to rollout a MaaS platform in 2019. Unlike Waymo, GM is capable of producing its own vehicles and has decades of experience building its own vehicles. The company knows its way around the regulatory environment too, which is certainly a plus.
Aside from its potential with Cruise though, the company’s own autonomous driving system works pretty good. While only available in the Cadillac CT6 at the moment, the automaker’s Super Cruise autonomous driving system will be available on many more cars in its lineup over the next few years.
In fact, in a recent study, Consumer Reports opted for GM’s Super Cruise over Tesla’s (NASDAQ:TSLA) Autopilot. Which brings us to …
Tesla’s Autopilot has been controversial at times, but it is considered by many to be the leading self-driving platform in the consumer vehicle segment.
To a large extent, it is. It’s got the widest footprint and most capability in non-geo-fenced areas. Geo-fencing, such as with GM’s Super Cruise, means that the road, city, track or whatever the driving scenario is, needs to be mapped prior to use.
That’s why less populated highway routes in the southwest are perfect for geo-fencing and sending out a fleet of self-driving trucks. For Tesla’s Autopilot though, it doesn’t work that way. Simply turn it on and it will do its best ability. That’s cool to some extent, but also where the controversy comes in, particularly as some drivers have died using the feature.
In any regard, Tesla is proving to be a leader in autonomous driving technology and electric vehicle technology. The Model 3, S and X are three of the safest vehicles according to NHTSA and battery degradation is pretty impressive compared to the other vehicles on the market.
From a technology and vehicular standpoint, Tesla is incredibly impressive. However, its balance sheet is not, (although some argue the fundamentals are improving).
As a result, that will no doubt keep many investors on the sidelines and that is fine. Even under a bankruptcy situation, it’s likely that Tesla will live on. And as a result, it’s a major force in AVs.
Like Nvidia, Intel (NASDAQ:INTC) is another component maker that is playing a role in the future of autonomous driving. After its pricey $15 billion acquisition of Mobileye, the company is making an even larger push.
Be it sensors, chips or other components, Intel has forced its way into the industry. This spring, the company announced it will supply EyeQ5 chips for level 4 driving in 8 million vehicles for an unnamed European automaker. The terms were also not disclosed and it won’t begin until 2021.
But still, 8 million cars is a lot of vehicles. Consider that U.S. consumers buy about 17 million new models per year.
The company’s also working on what it calls RSS, or Responsibility-Sensitive Safety. Essentially, it’s a system aimed at autonomous driving that allows the vehicle to be a reactionary unit in traffic. That is to say, it trains the vehicle to make the correct response for various obstacles.
Will it be better than Nvidia? We’ll have to see how it plays out. But there will likely be more than one hardware winner from the AV race.
NXP Semiconductors (NXPI)
NXP Semiconductors (NASDAQ:NXPI) is a really interesting name. Unlike NVDA, GM or GOOGL, it’s not a huge well-known company in the industry. However, because of its work in chips, NXP is a player in the auto industry as well.
Automotive revenue accounted for more than $1 billion of NXP’s revenue last quarter, nearly 50% of total sales. Just last month, NXPI acquired OmniPHY, a company that will be used to significantly increase the transfer speed of data in a vehicle. Given the strenuous demand of an AV and the incredibly large amount of data, increasing these transfer speeds even fractionally can be a big deal.
However, the larger overhang is actually its failed merger with Qualcomm (NASDAQ:QCOM).
After almost two years, the merger had gotten approval from every party involved, except the Chinese. Amid the trade war with the U.S., the Chinese simply did not provide an answer on the deal, allowing QCOM’s acquisition of NXPI to fall through. In doing so, Qualcomm paid NXP a $2 billion breakup fee and moved on. That’s a hefty sum to receive for a $28 billion market cap company.
Last quarter, NXP also announced a $5 billion buyback, again nothing to shrug at given its size.
Earnings are forecast to grow just 2.2% this year, to go along with 1.8% revenue growth. Given that NXP trades at less than 12 earnings though, the stock doesn’t look too bad. However, NXPI looks downright cheap when looking to 2019. Estimates call for almost 5% sales growth and more than 20% earnings growth.
I wanted to go with BlackBerry (NYSE:BB) for this last one, but I’m going with Baidu (NASDAQ:BIDU) instead. Both stocks have been beaten down, but Baidu’s work with Apollo, its self-driving business unit, is impressive.
Just like how Baidu is “the Google of China” for search, we can say the same thing about its AV desires. Interestingly enough, NXPI and Baidu actually work together in some autonomous driving respects. In fact, Baidu has other agreements in place too, such as the one with Daimler.
It has a host of vehicles to work with — ranging from street cleaners to everyday commuting cars — and is in essence, leading the charge in China.
After attending the Autonomous Vehicles conference in Detroit, MI. a few months ago, one thing was made pretty clear: The U.S. is not the only country going autonomous, but it may be best positioned. The highways are the simplest and we have relatively well developed infrastructure. Not necessarily in the sense of trains, non-decaying bridges and potholes. But in the sense of, all of our signs are uniform and similar, as are the laws, layout and order of our highways. For instance, the highways in Italy are different than those in Germany, as are the languages.
While emerging markets have their own hurdles, China is also a hub of technological advancement. AVs have a place on roads, in cities and at ports for example. And Baidu plans on being a key player in the entire revolution.
So when you think, “who’s doing what Waymo’s doing in the U.S. but elsewhere in the world?” Think Baidu.