Editor’s Note: With the stock market closed today in honor of Dr. Martin Luther King Jr., we wanted to bring you something special in place of our usual InvestorPlace Digest.
Matt McCall is the editor of Investment Opportunities newsletter. If you’re less familiar with Matt, he’s the former co-host of a daily investment show on the Fox Business Network. He was also the chief investment analyst for “Winning on Wall Street”, a national radio show. And he’s made over 1,500 appearances on financial news networks over the past decade. In short, he’s one of the most successful, respected analysts in the investment industry.
Today, as the editor behind Investment Opportunities, Matt spends his time identifying those massive trends that are reshaping our world — and creating huge investment opportunities in the process.
Matt’s track record of stock recommendations is littered with picks that have returned hundreds — even thousands — of percent for Matt’s followers. Today, he’s focusing on a new investment trend that’s setting up for similar explosive gains.
Here at InvestorPlace, we pride ourselves on bringing you the smartest insights available to the investment community, all to help you grow wealthier and wiser. To that end, we’re thrilled Matt has agreed to let us share with you the first in a series of essays he has been sending to his subscribers over the last few days. It details the latest trend that has him so excited.
We will be sharing the other essays in this series with you in a special send of the Digest this week.
Enjoy! And Happy Dr. Martin Luther King Jr. Day.
The Phoenix Experiment: Proving Ground for One of the Biggest Investment Opportunities You’ll Ever See
By Matt McCall
When you hear the words “Phoenix, Arizona,” what comes to mind?
If you’re like most people, it’s things like hot weather, the desert, year-round golf, and hosting major football games.
Phoenix is about to add another item to that list. The city is about to go down in history as “ground zero” for a historic economic revolution … one that will totally reshape the way we work, play, communicate, and travel.
This revolution will not be measured in the billions of dollars, but in the trillions of dollars. Think something as impactful as the printing press, the internet, or the telephone.
If you know anything about investing, when you hear the words “economic revolution,” you think “big opportunity.”
You’d be right to think that of what’s happening right now in Phoenix. I’m not exaggerating when I say what’s being hatched there will create one of the five biggest investment opportunities you’ll ever see in your life, no matter when you were born.
I’m talking about an opportunity to earn 10, 50, even 100 times your original investment.
So what’s happening in Phoenix?
Simple: Phoenix is home to the world’s most important, most extensive self-driving car test program.
What developers learn from this program will change the way we get around in a way we haven’t seen since Henry Ford started making the Model T in Michigan. It will have ripple effects that last decades.
Today and in more essays to follow, I’ll explain what’s happening, why it’s going to change the world, and how you can position yourself to benefit.
Self-Driving Cars 101
Autonomous vehicles (AVs) use advanced electronics and computers to drive themselves.
The concept of AVs has been around for decades. You’ve probably seen plenty of them in sci-fi shows and movies.
However, it’s only in the past 10 years or so that technology has advanced to the point that it’s possible to build and operate a viable AV.
It’s an innovation that has enormous ramifications across all aspects of life …
— Elderly folks who can’t drive will become much more mobile.
— You’ll be able to read a book or watch a movie on the way to work.
— The number of car crashes related to drunk, distracted, or sleepy drivers will plummet.
— Your car will be able to work for you during the day, operating as a taxi and making you money.
— If you choose, you won’t have to own a car at all … you can simply order rides from fleets of “robo taxis.”
— The cost of delivering things like packages and groceries will plummet.
— The billions of hours we spend driving will be “unlocked” and put toward productive use.
Again, it’s only in the past 10 years or so that technology has advanced to the point that it’s possible to build and operate a viable AV. That’s because AVs require a handful of critical technologies to operate safely and efficiently. They need lots of advanced sensors to “see” what’s happening on the road and around them. They need incredibly fast computers to process information. They need powerful and innovative software to make good decisions.
Technology in these areas has progressed so much that we are now on the verge of mass AV adoption.
Since so much of typical daily life revolves around traveling by car, the development of AVs will transform trillions of dollars’ worth of manufacturing and service businesses.
With this much at stake, it’s no surprise many of the world’s smartest, richest, most powerful entrepreneurs and investors are working day and night to dominate the self-driving car market. The companies trying to get their share of this enormous market represent a “who’s who” of the technology and manufacturing world.
I have no doubt the winners of this race will see their stock market values advance 10-fold … 20-fold … even 100-fold over the coming decade … taking investors along for the ride of their lives.
Who’s in this race?
It’s more accurate to ask who’s not in this race.
General Motors spent $581 million in 2016 to purchase self-driving car firm Cruise Automation. And in 2017, GM announced it would expand the self-driving startup by adding 1,100 new jobs and building an expensive new research facility. The company also has plans to roll out AVs as soon as 2019 through its affiliate, Lyft.
Not to be outdone by its rival, Ford Motor invested $1 billion last year in robotics company Argo AI. The startup was created by former Uber and Google employees. Ford has announced that it plans to have fully autonomous vehicles by 2021 to be used for ride-sharing.
Volvo has promised that by 2020, nobody will be killed or seriously injured in a new Volvo, thanks to self-driving technology.
And it says it will release a car for sale in 2021 that will allow you to “eat, sleep, work, watch a movie, and relax” while commuting on the highway.
Other automakers could have these vehicles on the road even sooner.
Honda, Nissan, Hyundai, and Toyota say they will have AVs on roads by 2020.
Like the invention of the train or the personal automobile … self-driving cars are going to reshape the American landscape once again.
How you vacation … where you live … even the way we design our cities and neighborhoods will change.
And early investors stand to make a windfall.
Intel says the market could be worth $7 trillion in annual revenue when the situation fully plays out. And yes, you read that right. It is $7 trillion with a “T”.
Believe, me, Intel knows a thing or two about this sector. It invested an astounding $15.3 billion to buy the self-driving car technology leader Mobileye.
Elon Musk, the controversial and brilliant leader of Tesla, is also betting big on self-driving cars. By manufacturing its vehicles with the hardware needed to be fully autonomous, Tesla is a clear leader in the AV race. Having the hardware already in place and the ability to update its vehicles via software is a game-changer.
As soon as the software is developed and tested, it theoretically could be uploaded to the vehicle, making it instantly autonomous. There are a wide range of predictions of when this will occur. My own expectation is somewhere around the early part of 2020.
However, when it comes to real-life testing, Waymo (a subsidiary of Google’s parent company Alphabet) is doing some of the most amazing stuff … in Phoenix, Arizona.
The Phoenix Experiment
Thanks to Google, Alphabet is extremely profitable and generates a ton of cash flow. That gives its owners billions and billions of dollars to invest in new technologies. Alphabet expects these “other bets” could lead to massive new businesses.
Its most successful “other bet” so far is Waymo, a subsidiary company that develops self-driving car technology.
In April 2017, Waymo introduced its “Early Rider Program” in Phoenix. It offered self-driving car services to about 400 volunteer families in the area. As you read this, “robo taxis” are hauling “Phoenicians” to school, soccer practice, and the grocery store.
Phoenix was selected as home for this extraordinary test program because the state of Arizona has created a favorable regulatory environment for self-driving car development. Plus, there are no icy roads to navigate in Phoenix.
Waymo’s Phoenix Experiment has been very successful. Waymo reports that its self-driving car fleet is now driving more than 24,000 miles per day — the equivalent of an around-the-world road trip. Waymo also reports that its fleet has racked up over eight million miles in fully autonomous mode. Here’s a chart from Waymo that shows the extraordinary increase in autonomous miles driven:
While Waymo is in the very early stages, it is right up there with Tesla as one of the clear leaders. Morgan Stanley recently raised its valuation of Waymo to $175 billion, with nearly half coming from the company’s ride-hailing services.
Alphabet currently has a market cap above $750 billion, and it definitely does not have $175 billion from Waymo figured into that number. If Waymo continues to lead the AV charge, it will be one reason Alphabet joins Apple and Amazon as the next trillion-dollar company.
Waymo has just introduced the first commercial self-driving car service in Phoenix. It is called Waymo One. Drivers can hail a cab through a smartphone app. (If you’re wondering what it’s like in one of Waymo’s cars, riders report that it’s like riding with a very, very cautious driver.) It will start small with volunteer testers trying it out first, and will be available to more people and more places over time.
In other words, self-driving cars are not a sci-fi fantasy. They are real … and they’re driving real people around as you read this.
In a future essay, I’ll explain how self-driving cars work, and then we’ll go on to discuss some of the specific companies best positioned to capture big parts of this multi-trillion dollar market.