One of the side benefits of artificial intelligence (AI) and virtual reality (VR) for investors is that it has led to a focus on self-driving car stocks. Investor focus has shifted to this area as aspects of this technology have already appeared in automobiles. Features ranging from braking assistance to blind spot alerts have prevented accidents and saved lives over the last few years.
Now, with autonomous cars, the technology has begun to realize its full potential. Companies have started to build trucks that are not only fully autonomous but also possess no controls for a human driver. Such changes have further helped draw investors into self-driving car stocks. As a result, chip companies, and sometimes car companies themselves have benefited.
More recently, new investors have also found opportunity. Due to trade wars and selloffs related to other tech niches, some of these stocks have seen valuations fall in 2018. This gives self-driving cars a segue to lead a stock recovery in tech and other sectors.
The following four companies not only act as self-driving car stocks, but they also sell at levels that provide opportunities for prospective buyers.
General Motors (GM)
General Motors (NYSE:GM) stock finds itself on the list of self-driving car stocks for reasons different than most peers. Most automakers have outsourced the autonomous cars technology to chip companies.
However, GM acquired a San Francisco-based startup called Cruise in 2016. Through this subsidiary, it placed a self-imposed deadline of 2019 for offering a self-driving car service. GM hopes Cruise will give the company tech innovation away from its bureaucracy in Detroit while GM provides the resources to refine and improve the technology.
If successful, it could reinvigorate GM stock. Although its price-to-earnings ratio remains at just above six, the stock has become cheap for a reason. Uneven profits and high fixed costs have left the stock’s value little-changed since the company reintroduced the equity in 2010.
Still, stocks with such a low P/E lower the risk of buying GM stock. Moreover, analysts expect profit growth to resume in 2021. Stockholders will also receive a dividend yield of almost 4%, while they wait for a recovery. Whether GM’s more direct role in autonomous cars bolsters the stock remains unclear. However, with the low valuation and the dividend, buying GM stock here likely becomes a question of how much one can profit rather than whether investors would lose.
Intel Corporation (INTC)
Intel (NASDAQ:INTC) makes the list of self-driving car stocks due to its purchase of Mobileye. Mobileye, an Israel-based subsidiary, bills itself as the “Most Trusted Name in Collision Avoidance.” It already works with 27 automakers worldwide to assist drivers to improve blind spot awareness and collision prevention. Now, companies such as Nissan (OTCMKTS:NSANY), BMW (OTCMKTS:BMWYY) and VW (OTCMKTS:VWAPY) partner with Mobileye to equip their cars with self-driving technology.
This helps create opportunity in INTC stock. Although Intel has moved on from the PC era, it has not seen as dramatic of a recovery as Microsoft (NASDAQ:MSFT) and other tech stocks from decades past. Its market cap remains under $230 billion. INTC stock has traded in a range this year. It also maintains a P/E ratio of 11. This comes in much lower than many tech peers, and even lower than its five-year average of 15.9.
However, profits grew by 30.9% this year. While income growth will see only a minimal increase next year, analysts expect average growth of 10.2% per year for the next five years. Even if it does not return to its glory days of the late 20th century, I think INTC stock should see a relative recovery, partially by becoming a autonomous cars stock.
Nvidia (NVDA)
Few equities define self-driving car stocks better than Nvidia (NASDAQ:NVDA). Investors had left NVDA stock for dead in the middle part of the decade. However, they returned to the stock in a big way when Nvidia applied its gaming technologies to several cutting-edge areas of tech. Now many consider NVDA a leader in some of these areas, with autonomous cars serving as one of the most important specialties.
The self-driving car industry just achieved a crucial milestone. Analysts expect Sweden’s Transport Agency to award the world’s first commercial license on a driverless truck in early 2019. This truck will run on the Nvidia Drive platform. Most notably, it will not feature a driver cabin, a testament to the confidence in NVDA.
Best of all, this comes at a time when NVDA stock appears to have gone on sale. Thanks to the crash in the crypto market, NVDA has fallen more than 40% below the $292.76 per share high of early October. As a result, the P/E ratio of about 23, is well below the 50+ multiples seen earlier this year.
Due to the chip glut caused by the decline in virtual currency, growth will pause next year. However, analysts forecast a long-term profit growth rate of about 15.6% per year on average. Momentum has also returned. NVDA has risen from around $135 per share to almost $170 per share just in the last two weeks. This should help investors profit as NVDA stock drives the future.
NXP Semiconductor NV (NXPI)
Netherlands-based NXP Semiconductor (NASDAQ:NXPI) found its way into the self-driving car market through acquisitions. Its purchase of Freescale Semiconductor and more recently OmniPHI has made the chip company a peer of Nvidia in this area. Its systems combine features such as sensor fusion, radar and vision to make the experience with autonomous cars possible.
Regarding NXPI stock, it behaves like a more conservative, slower-moving version of NVDA stock. Its P/E ratio of just under 12 might appear much cheaper than its peer. Still, it has not reached the high multiples of NVDA either. Also, NXPI stock fell for most of the year. However, it has bounced back from multi-year lows of around $70 per share.
It currently trades at $85 per share.
NXPI stock experienced a dismal 5.8% profit growth rate this year. However, the average double-digit growth rates should return next year and remain in the years to come. Wall Street forecasts 21.7% growth next year. They also believe profit growth will see an average of about 13.8% per year over the next five years. NXPI stock may not receive the attention of NVDA. However, with its lower multiple, double-digit growth, and lower volatility, it provides a suitable alternative for value investors who want a stake in self-driving car stocks.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
